Implementation of the National Broadband Plan: Issues, Opportunities and Challenges Jonathan S. Marashlian Michael P. Donahue Speaker Bios • Jonathan Marashlian, partner at Helein & Marashlian, LLC, The CommLaw Group, assists clients with regulatory compliance and strategies, transactional, litigation & regulatory defense matters before the FCC and state regulatory agencies across the nation. He counsels clients in all aspects of state and federal regulatory matters, focusing on compliance with the Universal Service Fund and similar regulatory programs through his firm’s unique Compliance & Reporting Services. Jonathan earned his J.D. from the George Mason University School of Law. • Michael Donahue is a Senior Associate at Helein & Marashlian, The CommLaw Group. He has represented CLECs, ISPs, VoIP providers, DSL providers, and other domestic and international data and voice telecommunications providers and technology companies in all aspects of their businesses, including regulatory compliance, corporate and transactional matters, public policy advocacy and litigation. His recent experience as Senior Counsel for a Tier I broadband Internet provider with one of the largest IP transit networks in North America gives him an inside perspective on the issues facing broadband network and service providers. Michael earned his J.D., cum laude, from the Catholic University of America Columbus School of Law. Introduction: Purpose of this Series • Part 1 – Introduction, Background, Predictions (June 8, 2010) • Part 2 – Issues for Government – public safety, next generation E911, privacy/cybersecurity, etc. (Date TBD) • Part 3 – Competition Issues – Access to poles, conduits, and rights-of-way, USF contribution reform, etc. (Date TBD) Part 1: The National Broadband Plan: Issues, Proposals and Predictions Overview of the National Broadband Plan • Comprehensive plan aimed at improving broadband deployment • Aggressive regulatory reform • USF reform, intercarrier compensation reform • Opportunities for growth & investment Purpose of the Plan • What are the FCC’s goals? 1. Improved broadband deployment, access & adoption in un/under-served areas • Goal of 100 MBPs access to 100 million people by 2020 2. Promote world-leading mobile broadband infrastructure & innovation 3. Enhance broadband competition to promote innovation and benefits to consumers 4. Advance robust and secure public safety communications networks FCC Broadband Action Agenda & Implementation Timeline • Announces 60 proceedings & initiatives aimed at implementing the Plan • Plan released April 8, 2010 • At least 40 policy/rulemaking proceedings expected from Q2 – Q4 2010 – VoIP classification order possible in 2011, USF subsidy methodology possible • Begin implementing USF contribution changes and intercarrier compensation in 2011 Broadband Action Agenda & Implementation Timeline Cont’d • USF transition 2011-2016 • Complete intercarrier compensation transition 2012-2016 • Eliminate high-cost fund, complete transition to Connect America Fund & Mobility Fund, complete transition to $0.00 intercarrier compensation 2017-2020 • 100 Mbps to 100 million people in 2020 Specific Proposals: USF Overhaul, Background on the USF • Subsidy program created by Telecommunications Act of 1996 • Created to achieve “universal [telephone] service” • Not designed to support broadband deployment Why the USF Needs Reform • ILECs receive a disproportional amount of subsidy funds • Huge error rates in pay-outs • Exponential growth in contribution factor • Inability to close the digital divide USF Overhaul: The Big Picture • Shift support from voice services to broadband • To be achieved in three stages, with the goal of connecting 99% of Americans by 2020 • Two revenue-neutral funds to be created – Connect America Fund- to extend broadband to un/underserved areas – Mobility Fund- to promote 3G service USF Overhaul, Stage One Stage One (2010-2011) 1. Identify funding that can be shifted immediately to jumpstart broadband deployment 2. Create a framework for the Connect America and Mobility Funds 3. Establish a long-term vision for intercarrier compensation 4. Examine middle-mile costs and pricing Specific Proposals: USF Overhaul Cont’d; FCC Releases NOI/NPRM • On April 21, 2010, the FCC approved a NOI and NPRM proposing and seeking comment on ways to cut inefficiencies in the current USF system and transition to the Connect America Fund The Initial NOI • NOI seeks comment on use of economic model to tariff support areas where no private-sector business can provide broadband and voice services (eliminates the gap between cost of deploying broadband and the potential additional revenue generated from the broadband investment) The Initial NPRM – NPRM seeks comments on proposals to reduce legacy universal service spending and shift to support for broadband communications – Proposals include: 1. Capping the overall size of the high-cost program at 2010 levels 2. Reexamining current regulatory framework for smaller carriers 3. Phasing out support for multiple competitors in areas where the market cannot support even one provider – Comments due July 12 ; Reply comments due August 11 USF Overhaul, Stage Two • Begin disbursements from CAF and Mobility Fund • Reform contribution methodology – Numbers-based – Connections-based – Revenue-based USF Overhaul, Stage Three • Complete Transition of High-Cost Fund into CAF and Mobility Funds • End support for voice only networks • Finish intercarrier compensation reform Implementation Obstacles 1)FCC’s Authority to Regulate Broadband absent Congressional Action 2)Magnitude of the Plan 3)Technical Limitations 4)Funding Obstacles: Legal Authority to Regulate Broadband • Commission must have authority to regulate broadband generally, and to impose USF obligations on broadband service providers • To support USF, FCC requires contributions from broadband providers • Only “telecommunications” subject to USF • Must reclassify broadband as “telecommunications” Obstacles to Implementation – Authority to Regulate Broadband, Comcast v. FCC Comcast v. FCC DC Circuit found FCC did not have expressly delegated authority to regulate Comcast’s provision of Internet service and could not exercise its ancillary authority without tying the ancillary authority to an express statutory delegation of authority The Congressional statements of policy cited by the FCC are not statutory delegation of authority and, therefore, cannot support exercise of ancillary authority Commission faced with high hurdle on path to National Broadband Plan implementation The First Way – Stay the Course • Continue to treat broadband as an unregulated “information service” • Concede limited authority under Comcast • FCC must rely upon its ancillary authority to regulate broadband which will subject the Commission to jurisdictional challenges based upon the Comcast ruling • Continued treatment of broadband as an information service deprives the FCC of any real chance to implement its Plan (Unless the Commission can get USF contributions from broadband service providers, it can’t support broadband deployment because the Fund is dwindling) The Second Way – Heavy Regulation • Reclassify broadband Internet access as a telecommunications service subject to the full suite of provisions under Title II • Could regulate broadband like a traditional telecom service & assess USF fees on providers • Inconsistent with regulatory policy and new technologies The Second Way – Cont’d • Commission would have to find an alternate basis for regulating broadband • Would fall subject to jurisdictional challenges • Complete overhaul of existing regulatory regime • Not a realistic solution in light of the Comcast decision The Third Way • Would separately classify the transmission component of broadband Internet access services as “telecommunications,” when offered on a common carrier basis, subject to limited Title II regulation • The information component would be subject to a limited set of regulations pursuant to the FCC’s ancillary jurisdiction under Title I • Preserve common vs. private carrier distinction The Third Way Cont’d - Details (1) The Commission would recognize the transmission component of broadband Internet access services as a telecommunications service when provided on a common carrier basis (2) The Commission would apply only a handful of Title II provisions to the transmission component of broadband Internet access services, particularly Sections 201, 202, 208, 222, 254 and 255, requiring (a) USF contributions (254); (b) 201, 202 & 208- prevention of unreasonable denials of service & other unjust practices; (c) Section 222- protection of confidential subscriber information; and (d) 255- making equipment accessible to individuals with disabilities unless not reasonably achievable (3) The FCC would renounce the application of other “unnecessary” provisions of the Communications Act to broadband service providers; and (4) The Commission would erect “meaningful boundaries” to prevent regulatory overreaching The Third Way & Brand X NCTA v. Brand X – Supreme Court upheld an FCC order classifying cable modem Internet access service as an information service, exempt from Commission jurisdiction – Scalia dissent found Commission’s interpretation of the Communications Act to be unreasonable and unlawful – Third Way consistent with Scalia’s dissent in Brand X Implementation of the Third Way To implement the Third Way, the FCC must: (1) Adopt a notice of inquiry or notice of proposed rulemaking proposing to reverse its