Transcript: Community Broadband Bits Episode 349

This is the transcript for episode 349 of the Community Broadband Bits podcast from the Institute for Local Self-Reliance. In this episode, Christopher speaks with Jonathan Chambers about the FCC's Connect America Fund phase II reverse auction and satellite Internet access provider Viasat's attempts to retroactively change program testing requirements. Read the transcript below, or listen to the episode.

 

 

Jonathan Chambers: Ask the people in those areas. Ask them to make the judgement. Run tests where they test the quality of the service. Listen to people. Put first the people that you're supposed to serve. You'll get your decisions right more times than wrong.

Lisa Gonzalez: Welcome to episode 349 of the Community Broadband Bits podcast from the Institute for Local Self-Reliance. I'm Lisa Gonzalez. Jonathan Chambers from Conexon is becoming somewhat of a regular on our show. He's back again, and this time he's here to discuss an issue that's arisen regarding last year's Connect America Fund Phase II auction. Christopher and Jonathan talk about the award that went to satellite Internet access provider Viasat. There are questions surrounding the company's request to retroactively change some of the project eligibility requirements. It appears as though the FCC is considering honoring Viasat's request. In addition to the effect on other Internet access providers who bid but did not receive federal funding, the issue questions the integrity of the process and the commission. Jonathan, who used to work for the FCC, talks about the importance of including local perspective and experience when making these types of decisions. Jonathan and Christopher also discuss possibilities for how people at the local level can let government agencies, such as the FCC, know their thoughts about these kinds of decisions. Now here's Christopher with Jonathan Chambers.

Christopher Mitchell: Welcome to another episode of the Community Broadband Bits podcast. I'm Chris Mitchell with the Institute for Local Self-Reliance talking to an old favorite guest, Jon Chambers, a partner with Conexon. Welcome back to the show, Jon.

Jonathan Chambers: Thanks Chris. Thanks for asking me

Christopher Mitchell: When you were last on, we talked about the Connect America Fund auctions and a lot of the things that went right, maybe some of the things we weren't super happy about. We're gonna pick that up a little bit today with a little bit of retrospection, perhaps, and talk specifically about something that has gone wrong and in many ways has actually gotten worse because of other developments since then. But first, let's just briefly remind people, Jon, if you could, what was the Connect America Fund auction, for people who might not remember?

Jonathan Chambers: So the auction was a reverse auction, meaning the federal government was offering funding in exchange for delivery of service. This goes back many, many years when the FCC had decided that it was going to change its funding of telephone service in rural and high cost areas to fund instead the combination of telephone, voice service, and broadband service. And over many years, the FCC developed a mechanism for doing just that, and the mechanism is an auction mechanism. The first larger scale test of this auction was held last July and August in what is referred to as the Connect America Fund II auction. There will be followup auctions of that one because not all of the areas of the country were bid out. Not all of the areas of the country have yet been opened up for auction. That was the first and in many cases a test case of if you hold an auction, if you offer funding, will you get companies willing to serve high cost rural areas with high quality broadband service? And in large part, the auction was a huge success. There were bids across the country. In every one of the 30,000 census block groups, there was interest in bidding. In the time since the auction was closed, the FCC has engaged in that next step, which is to confirm the ability of companies to fulfill their obligations, to gather the paperwork, to collect network diagrams, to go through what is called the Eligible Telecommunications Carrier process at the states where funding was won — all of those steps, which are the precursor to actually giving out funding and having the companies that bid on the areas agree to start building networks and providing service. The very first of the authorizations for funding have been prepared over the last just several weeks, so we're in that phase. It's been six, seven, eight months, but we're in that phase now of the FCC reviewing, state commissions reviewing, companies responding to requests, and this, as I said, sort of phase of authorization so that the companies can get about the work of building networks and providing service.

Christopher Mitchell: And Jon, your company Conexon works with electric cooperatives to provide fiber service. You've been contracted with cooperatives that have gone after these subsidies, you've worked with cooperatives that have not needed to go after them or have chosen not to go after them, but that's your background for several years now and where your expertise in this comes from, as someone who watches it very closely.

Jonathan Chambers: Yeah, so years ago, when I was at the Federal Communications Commission, I discovered through the analysis that the commission staff was doing that there was a real cost advantage for six, eight, ten separate reasons, a real cost advantage in building fiber networks in rural areas if you built leveraging the existing infrastructure of a rural electric cooperative. I became fascinated by those advantages, by the history of these co-ops, and the opportunity that they had to build world class telecommunications infrastructure in areas where no one else would build or could build. So when I left the FCC some years ago, I started working with electric co-ops in order to build, plan for, operate, design — everything, you know, soup to nuts, to deliver high quality broadband service in rural areas. And the company where I'm a partner, we formed what we called the Rural Electric Electric Cooperative Consortium to bid in the CAF II auction last year. So we were a participant in the auction, won funding across the country, a total of $186 million over 10 years, all to do one thing: to build Fiber-to-the-Home networks to offer gigabit speeds in areas that are currently unserved and areas that really have no other prospect of getting gigabit service, the same levels of service you can get in most of the country today.

Christopher Mitchell: And so I think it's worth noting that we're not going to go into great depths about rural broadband and satellite. I think we're saying that we think that there are many reasons why satellite is not a good long term solution. In particular, the standard satellite we see today, which may be capable of high throughput but has latency problems and other problems including very high cost. But, I might sum it up this way — and Jon, you can jump in to correct me or to, you know, add on — but Viasat won more than $100 million in the auctions. In many ways I kind of felt at the time, well I don't think it's a great investment, but at least people living in some areas will have subsidized satellite while we wait for something better to get to them. And then the ReConnect program came along — and this is a program out of the Department of Agriculture, $600 million for rural areas — and said that any areas that were getting money from the Connect America Fund Phase II auctions would not be eligible effectively — there's a little bit of nuance, but effectively not eligible for this money, which in my mind changed everything because then communities that get Viasat money went from, in my mind, saying, "Oh, it's kind of a waste of money, but there's maybe a mild benefit to it," to "Actually this is a very bad situation because getting money for Viasat now means you are not eligible for the real money that matters to build high quality networks to your region."

Jonathan Chambers: It's a difficult puzzle that the federal government, state governments, others have been trying to solve for many years, which is the only reason anyone is engaged in this, anyone meaning the government agencies are engaged in this, is because of market failure, and not market failure in any profound sense. Just simply, where there's a lack of decent broadband service, there's a lack of a lot of things. Lack of decent cell phone service, lack of cable television service. It's the same network economics that play itself out over and over again. And so, the government has devised ways of trying to subsidize or give grants in order to get service out to high cost rural areas, and satellite is a part of that. It's long been recognized as part of the solution. The difficulty is that, at least to the way I think of it, satellite today, satellite in the past — and you know, I'm not making predictions about the future, but the likelihood is that satellite doesn't now and won't deliver the same quality of service that you get through other technologies, Fiber-to-the-Home for example. So if the government is going to make a decision to spend the public's money, part of the question is how long is that funding cycle, and does it preclude any other solution for those areas? If you think something is better than nothing. So satellite — not to disparage satellite — but better than what is out there today, and what the government is doing is buying some capacity on the satellite network so people can afford satellite. That is, it becomes more affordable to use the Internet in a fulsome way. The question is how long and does that become the exclusive solution in some of these areas? And the combination of the FCC's decision, which was to permit satellite participation, and then the Rural Utility Services decision to exclude any other funding for any provider, any solution, any technology if satellite or anyone else receives funding from the FCC, that means that in those areas of the country where satellite is the option from the FCC, other parts of the federal government, the Department of Agriculture through their RUS programs, they won't fund anything else. That's their decision. I disagree with the decision, but that's their decision to date. If you have satellite through the FCC's program, that's the only type of service that the federal government has decided it will fund for at least the next 10 years, if you follow their logic. That's the cycle of these programs: 10 years. 10 years is an awfully long time in technological development. 10 years would be an awfully long time for a rural community to be excluded from the same types of service, the same levels of service that are available to the rest of the country.

Christopher Mitchell: I think it's worth noting that over this period of 10 years, it's not like we're thinking of these areas where they're just super remote on top of a mountain. These are areas that may be just a few miles from areas that are getting Fiber-to-the-Home over the next three years from some of your rural electric cooperatives. You know, so these are not areas that are totally inaccessible. We're not talking about Alaska here in this case. We're talking about areas that people will, over 10 years, move from the areas in which satellite is the exclusive option to a few miles down the road where they may have fiber optic Internet service. And so this is where, you know, as you're describing it, I know that you care deeply about this, but the injustice of it, that the community has no say over it, is staggering.

Jonathan Chambers: That very point you make has been to me the one fatal flaw in government funding programs of this nature. There is no opportunity anywhere in the process for a local community, for the residents of a community, for the businesses in the community to have a say in the services that are funded by the federal government. This is purely a dialogue between the federal government and in the past, telephone companies and more recently, any other Internet service providers. And by that I mean, it's about the only federal program that the FCC administers that I can think of in which no consumer choice, no consumer preference, no consumer decision is involved at all. It's as if you'd say, well, we in the federal government — that's when I was in the federal government and since I've left — we in the federal government think that we know what's best or we know at least what's possible for your area. I have said frequently over many, many years now, that it is not just possible, but it is realistic to build Fiber-to-the-Home, to every single rural home in America. In most cases, you don't need any federal support, state support, subsidies, grants or anything else, but there are areas as you get more and more rural, as you get below 3, 4, 5 homes per mile, where some public support is necessary in order to bring the level of service up to the same level of service you get in the rest of the country. So to me the question has always been, what do you spend the public's money on? And to me also, you know, the related question is if you're going to spend the public's money, why not ask the public what it would prefer? In the case of satellite service, there is an easy fix of course, which is if the FCC is going to fund one program, it shouldn't preclude all other programs, from being available to rural areas. If there needs to be some displacement, some tradeoff between one funding program and another, well that's just math — you can figure that out. But what if we're talking about is precluding an area from ever getting the level of service that you get in the rest of the country — where I live, where you live. Well that to me, that 10 year period of time we were talking about, that's a digital death sentence. You can't expect the community to attract investment, to attract businesses, to have startup businesses, to keep young people if the community is going to be in a disadvantageous position with respect to the rest of the country and most of the rest of the world.

Christopher Mitchell: And so this is where I wanted to set that context as we go into the second piece of this discussion, which is to summarize that in many ways, I don't think we would even be having this second part of the discussion, if not for the fact that this is so important for these rural residents, these rural businesses that they not be precluded from a better solution. And that's that because it is now so important who gets the money and how it is spent, when we look back, we find that it appears that the FCC may quietly, retroactively change the rules of the program to advantage Viasat — rules that that prevented there from being additional satellite bids because HughesNet had decided it could not meet the standard that was required in order to participate in the auction. Viasat argued it could meet those standards. And now that the auction is over, it's quietly trying to change the standard, and it appears the FCC may go along with it. It's just mind boggling.

Jonathan Chambers: Yeah, sometimes things sounds so strange that you don't really believe it. I've been following this, but I hadn't weighed in on the controversy between Viasat and Hughes — both satellite providers of broadband service, both submitted applications to participate in the CAF auction that we've been discussing. And last year, the FCC adopted a rule that they'd been working on for many years to set the terms of how do you test the services once the money has been spent and once the services have been deployed? How do you ensure that the public's money was properly spent? So the FCC adopted these testing protocols, referred to as the metrics order, and upon reviewing the testing protocol, Hughes decided that it could not meet the voice tests because of the latency of satellite. If you're making a satellite voice call, you still have to do a round trip between whatever your device is, the connection to the satellite, and then back again, and that latency can be half a second, 600 milliseconds, it can be a second or longer depending on whether you're calling a landline device or another satellite device. Hughes — and this decision was made before the auction — Hughes reviewed the rules and decided it was not possible to meet the test. Viasat apparently made a different decision because Viasat participated in the auction. Viasat bid in the auction, won as you mentioned in 20 states $110 million. And then something really odd occurred. Viasat and Hughes both asked the FCC to change the rules that had been adopted. Hughes asked them at the FCC to change the rules prospectively, and Viasat asked the FCC to change the rules retroactively. And Hughes has since been before the FCC — this is all public information; you can read their comments and their filings — and explained to the FCC that if the rules were changed, it would be an unfairness to Hughes and the other participants in the auction because Hughes would have participated in the auction under a different set of rules. So when I said sometimes things are strange and, you know, you wouldn't think they would occur, it does seem to me that Viasat is holding two or three positions that contradict each other. Either it believes it can comply with the rules, in which case no rule change needs to be made, or it believes it can't comply with the rules and is asking for a rule change to be made. If it thought it could comply with the rules at the time of the auction, then I think it's a pretty easy problem to solve. You don't change the rules. If Viasat now believes that it cannot comply with the rules, well that's a much tougher problem to solve because they bid throughout the country and their bidding affected other bidders. It affected our bids. That is to say, the co-ops that I worked for would have won more money. And you know, then you get to the really fundamental question of the integrity of the auction process itself. If you're gonna change the rules after the game, how can you trust the game? If you're going to change it even in small ways, if you're going to consider — you know, one test was sufficient last year, but now we're going to consider it different tests that might be easier to meet or the test standard might be slightly different or the number that you have to test to should be changed. Even small changes can have sort of fundamental effects on the auction integrity, on the participants in the auction. The easiest thing of course to do is to stick with the rules that are adopted in the first instance, adopted prior to the beginning of the auction, which is what I expect the FCC will do. I mean, how could you do something different than that? The FCC has 30 plus years experience in considering auctions, running options. It is the crown jewel of FCC policy and spectrum policy, now in this funding for rural areas policy. You don't throw all of that away by doing something as detrimental to the interests of the public and the bidding participants as changing the rules after the game.

Christopher Mitchell: You and I both know different groups that are directly impacted by this. I've talked to a rural electric that would be seeking money to expand under the ReConnect program, the USDA program, to expand its Fiber-to-the-Home service into areas that are ineligible because they're getting Viasat money. I've traveled to a community that is now ineligible, and they were going to partner with a local telephone company in order to expand service. They're now basically out of luck because they can't access the money, and you know even more different groups that would be using ReConnect funds if not for Viasat getting that money and taking that money off of the table for those regions. And so, I wanted to, as we're getting closer to the end here, I wanted to note that we still have yet — so there's this issue of the FCC could hold to the rules. I feel actually feel embarrassed for saying that. Let's hope the FCC stands true and does not change the rules retroactively. But there's a second line, which is the state public utility commissions. They designate eligible telecommunications carriers who are eligible to receive funds like this, and theoretically a PUC could say, well, this entity Viasat cannot or does not get ETC status because they cannot meet the metrics we've decided to create for designating certain carriers to be eligible. Now, I'm sure you're going to explain this and in some ways I'm just trying to set you up for it, but is it possible then that for instance, the Pennsylvania Public Utility Commission could say, no, we're not going to give an ETC to Viasat, but that for instance, Oregon would roll over or another state would roll over and we would have this sort of split then?

Jonathan Chambers: Public utility commissions, public service commissions were given explicit authority in 1996 to consider this very question: is somebody that is seeking public support, federal funds in this case, are they eligible, are they qualified, are they capable of delivering quality service? That's a determination by states. In some cases, some of the states have deferred to the FCC on that decision, but in other cases they've done what they've been doing since the late 1990s. So you might get different determinations by different states because the state has this long view, the state commissions are a little bit closer to the people than the FCC, and so the states do have a responsibility to look out for the quality of the service provided. You know, I think this comes back to the other point that I was making. For a state to know whether the service is acceptable, it does seem to me that the easiest course for a state to take is to ask the public, to ask the public that it is supposed to serve. The testing that needs to be done of any type of service should be done in the areas where the public is affected. Like you mentioned Oregon. The people in Salem, Oregon, where the Public Utilities Commission sits, they're not affected by this decision one way or the other. But people in eastern Oregon are. People in Rural Oregon are. People who live where the population is two and three homes per mile, they'll get affected by this decision. So I've been told over the years that you can't ask people, that you need expert agencies to make these decisions, and what I always come back to is if you divorce policy making from the people that are affected by the policies, you've made a fundamental error. Here I think there is a pretty straightforward approach, whether it's in Mississippi or Oregon or Pennsylvania or anywhere else. We know the areas that have been won in this auction, where folks would be applying for RUS grants or anywhere else. Ask the people in those areas, ask them to make a judgment, run tests where they test the quality of the services, listen to people. It sounds like — I'm the farthest thing from a populist, but I did believe when I was in the government, and I do believe now working for cooperatives, that if you put first the people that you're supposed to serve, you'll get your decisions right more times than wrong. If you even ignore the opportunity to ask the question, you've really done a disservice to the people you're supposed to serve. That that would be what I would suggest for a public service commission. Set up a testing mechanism, ask the people who live there, make your decision based on the results, you know, as you get responses from the people in rural areas. They're the only people who matter in this case. Certainly not me or you.

Christopher Mitchell: Well, I very much support that. It seems — I'm just trying to imagine what we would tell a person listening to this what they could do to make that happen. And I have to think that, for instance, if their state legislature held a hearing on this and made the PUC notice it, or even if you know, a few people from a legislature were to send letters to the public utility commission, asking them what's going on here, that might be useful.

Jonathan Chambers: Yes, I agree with that completely, but more important, I think a lot of times folks feel as if they have no voice, no authority, no power in these decisions. It's incumbent on both sides here, the two sides being the people who work in the government agencies and the people who live in these areas where the decisions affect their lives, to be involved. The reason that I love working with rural electric cooperatives is that everything hearkens back to a time when these cooperatives were first started in the 1930s, in the 1940s, where there weren't a lot of people just sitting around waiting, waiting for somebody to build something, waiting for somebody to come and deliver electricity because the waiting time had passed. There wasn't going to be service in those areas unless these membership organizations were formed, unless people did the hard work of putting up poles and stringing the electric wire. That start of 80 years ago, 85 years ago in some cases, continues through this day. It really is the most elemental community based effort and, you know, it's always been my message to rural areas: Build something. Build it yourselves. Go back to a time in which times were tough, when folks didn't sit around watching cable television and moaning about the state of the world. They got off their couches, they got up, they built something. Build something now. And to the extent that government wants to assist, assist in the community efforts. I mean, we are, you know, a country right now riven with divisions. The only small suggestion I have to anybody is to get off of Twitter, get off of TV, and go out and build something for yourself, your communities, your kids for the future. And I would suggest governments should support those efforts.

Christopher Mitchell: You can't go wrong by telling people to turn off the so called news on the TV, from my point of view. I might be a little bit softer on Twitter in terms of saying follow the people who are inspiring you to get out and build this stuff rather than the people who make you pull your hair out or the people you only agree with. But I agree entirely, and this is something that I was just reflecting on in a recent event I was at. The time you're talking about was not an easy time. It was a time when, if it wasn't their local economy that had cratered, it was a threat of Nazi-ism abroad. There were threats all over, and people still figured out a way to pull together. We certainly can do better than that in a time of the abundance that we have if people put their minds to it, so that's what we try to celebrate.

Jonathan Chambers: Yeah, I'm not suggesting, you know, hearkening back to some golden age.

Christopher Mitchell: Right.

Jonathan Chambers: The 1930s, the 1940s, those were hard times. Look, I have been criticized. Ecclesiastes teaches us that there is a time to tear down and a time to build up. I would suggest that in our country the time for tearing down is long past. We have been tearing each other down for the last several years, certainly, and will for the next couple of years. I would suggest that we look to the teachings of the past, and the way to stop tearing down is to stop tearing each other down and start to build. That there is reward in the act of building. That this time period you and I were just discussing was a time of building. That's how we got out of the troubles of the time. Bridges and dams and public works and national parks and these electric cooperatives, which built electricity to three quarters of the geography of our country over that period of time. I'd say we should build again.

Christopher Mitchell: This is also a time of great ideological difference then. This was a time in which people were very much divided between those who called themselves socialists, there may have been a few anarchists leftover, there were certainly capitalists, small business capitalists. There was a great variety, and we found common purpose in building together. You know, I think there may be a correlation between the fact that we have not done as much building over recent decades and that we are so divided because your experience and my experience is that when we talk about building in these rural areas in which we imagine that there is so much more division, we don't see it when people are working together for solving pragmatic problems. They put the kind of ideological stuff to the side and they work together and they have a good time. So, you and I could go on for a long time, but let me just give you a chance to agree or disagree.

Jonathan Chambers: Yeah, I think there's a heck of a lot of value and hard work in building these networks. That's what this really is — it's hard work. There's no magic. You've heard me say before, the Internet itself seems like magic. The ability to access information from almost anywhere in the world, the ability to communicate, to entertain and be entertained, to do all of that instantaneously —it's got a magical quality, but it's only delivered because of the hard work of people over decades of time. People who put up poles and strung wire and lashed fiber and create and put up buildings and structures, and invent new electronics — all of that is what enables the Internet. The Internet is a physical thing. And I'm not clever enough to know how to do what is created on the Internet, but I sure know how networks are built and what it comes down to. What it comes down to is hard work and the opportunity to do something for yourself, your community, your future. That's what I really ever suggested that the government do. Assist those who really want to help themselves and their communities. Ask people what they want, and then support their efforts. Don't make decisions for them. We're not that smart to make decisions for everybody in the country.

Christopher Mitchell: Well, thank you Jon. I really appreciate you bringing your expertise onto this. It's something we're following, we'll continue to write about and talk about here through ILSR's work. But [I] definitely appreciate the work you're putting into this, and let's hope that we make sure that people actually have some sort of say over their future.

Jonathan Chambers: Thank you Chris. Always great talking to you.

Lisa Gonzalez: That was Conexon's Jonathan Chambers talking with Christopher about the FCC and Viasat. We have transcripts for this and other podcasts available at muninetworks.org/broadbandbits. Email us at podcast@muninetworks.org with your ideas for the show. Follow Chris on Twitter. His handle is @communitynets. Follow muninetworks.org stories on Twitter. The handle is @muninetworks. Subscribe to this podcast and the other podcasts from ILSR, Building Local Power and the Local Energy Rules podcast. You can access them wherever you get your podcasts. Don't miss out on important research from all our initiatives. Subscribe to our monthly newsletter at ilsr.org and while you're there, please take a moment to donate. You can follow us on Instagram. We are ILSR74. Thank you to Arne Huseby for the song Warm Cuck Shuffle, licensed through Creative Commons, and thank you for listening to episode 349 of the Community Broadband Bits podcast.

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