ISSUES

TMC’S CONTINUE TO IMPROVE HIGH SPEED INTERNET
The National Broadband Plan: Connect America Fund
Stand Alone Broadband: Choosing to Go Naked or in the Pool
North Carolina Prepares for Next-Gen 911

 

TMC’S CONTINUE TO IMPROVE HIGH SPEED INTERNET


Do you have high speed Internet (broadband) and is it satisfactory? How does it compare to your friends? How does North Carolina’s compare to other states? How does the United States compare to the rest of the world? These are not simple questions to answer, and a number of studies return with different answers. If you receive broadband from one of North Carolina’s Telephone Membership Corporations (TMCs), you’re likely ahead of the curve.

In 1999, President Clinton visited North Carolina to discuss what was generally referred to as the “digital” divide. It was based on the idea that rural areas should not become second class citizens of the broadband world. North Carolina’s TMCs have worked diligently to assure that their member customers have broadband facilities that are comparable in price and quality to their urban counterparts. Although the TMCs operate in some of the most sparsely populated areas in 26 counties with an average population density of about eight customers per route mile, with one exception, broadband is available to 100% of customers. Even before the introduction of broadband, TMCs were providing dial up Internet service before most people even knew about the Internet.

Not too long ago, the News and Observer reported on a FCC study that ranked North Carolina at the bottom nationally – tied with Mississippi – in the percentage of households subscribing to a basic broadband connection and with the speed of their connection. The article postulated that too many North Carolina businesses and residents are stuck with last-generation cable and digital subscriber line (DSL) networks, while other places were sporting next generation fiber optic networks. At worst, the article is misleading. At best, it is based on a review of a limited study.

North Carolina’s Eight TMCs have been leading the charge to have 100% broadband availability in their incumbent territory for more than a decade. Star-TMC (located Southeast of Raleigh), which has the most sparsely populated service area in the State, has had 100% broadband availability since 2005. Every TMC has 100% broadband availability in their incumbent territory, except for one. That one is hardly straggling at 99% broadband availability, and the shortfall is more a function of geography than effort.

Complete broadband availability is an achievement for any telecommunications provider. North Carolina’s TMCs have achieved this in the most sparsely populated areas in the state. For instance, Star, Surry and Skyline only have fewer than six subscribers per route mile. Atlantic-TMC’s area has 12.5 homes per mile. Commercial companies could not, or would not, serve these areas. If it were not for the TMCs, the areas served by the companies would be largely un-served.

"As President of the North Carolina Telephone Cooperative Coalition (NCTCC), I am extremely proud of the job that the eight TMC’s have done, and continue to do, to bring technology to the most sparsely populated, rural areas of North Carolina we serve," said Lyman Horne, CEO of Star-TMC. "In many instances the deployment of this technology is under the most extreme conditions, for a small, but important, market."

As for speed, fiber optics cable is now running to many homes in North Carolina’s rural areas and is being deployed by all TMCs. This deployment is critical to ensure North Carolina’s rural areas do not lag behind their urban counterparts. Lyman Horne is one of the many who are ensuring this does not happen.

"The technology available in the TMC areas will rival, or even surpass, the availability of resources and infrastructure available in many urban markets of our state and nation and at comparable prices," says Horne. "The North Carolina TMC’s are committed to keeping current, and all are now involved in bringing the next generation of connectivity to the rural areas they serve."

In the last few years, American firms bought more fiber optic cable than all of Europe combined, and America leads the world in adoption of 4g/LTE mobile broadband. In international comparisons, four of the most critical metrics are deployment, adoption, speed and price. No nation leads the United States in more than two.

All in all, it seems the United States is not falling behind in broadband and that North Carolina’s most rural telephone companies are doing a fantastic job. In fact, all of North Carolina’s traditional telephone companies have made tremendous strides. North Carolina is already at 95% availability, and a commitment exists to help North Carolina achieve the goal of 100% availability. While we must continue to deploy broadband, the State needs to also concentrate on policies and programs that encourage more of our residents to come online and reap the benefits of broadband. It will be a hollow victory if the State has 100% availability but has not equipped its citizens with the tools they need to understand the benefits of the Internet and the knowledge to use it.

Of course, there’s still room for improvement, but the TMCs are leading the charge!


The National Broadband Plan: Connect America Fund


In November 2011, the Federal Communications Commission (FCC) set guidelines for transforming the Universal Service Fund that subsidized rural voice phone services into paying for high-speed broadband infrastructure, known as the Connect American Fund and Mobility Fund or the National Broadband Plan. The rules regarding the Universal Service Fund and the Connect America Fund are complex. Most companies support some aspects of the plan and oppose others. While progress has been made, the final rules for small, rural companies have not yet been resolved. Small, rural companies’ main complaint is that the plan drastically limits interconnection fees (how local telecoms charge each other to complete calls). Without question, it will be difficult for many small companies to see this source of revenue disappear.

At least thirty-one, lawsuits were filed all over the country, challenging the Connect America Fund. The 10th Circuit Court of Appeals consolidated those cases and rejected them entirely in May 2014, giving broad deference to the FCC’s authority under the Communications Act of 1934 and noting that the FCC had a rational basis for its decisions in creating the broadband focused Connect American Fund and Mobility Fund.

The FCC has recently been enacting Phase II of its Connect America Fund that provides ongoing support to deploy and maintain fixed-location broadband and voice services in high-cost areas at rates comparable to those offered in urban areas. Phase II funds are only given in areas without unsubsidized competitors for Price-Cap Carriers, which are generally larger companies. In North Carolina, AT&T, CenturyLink, Frontier, and Windstream will receive more than $19 million of funding annually for the next few years. Carriers receiving CAF support must complete 100% of the build-out by the end of 2020 with required milestones each year.

Many smaller telephone companies and cooperatives are designated as rate of return carriers. The rules for small companies are less certain, and the future is still murky. In 2014, the FCC designated funds across the country for rural broadband experiments. These experiments will be ongoing, and $100 million will be awarded to experiments in monthly installments throughout the next 10 years. The goal of these experiments is to provide funds for broadband infrastructure in unserved and underserved areas and to allow the FCC to learn how to most effectively assist small companies that deploy broadband in rural areas.


Stand Alone Broadband: Choosing to Go Naked or in the Pool


As competitors continue to enter our service areas, many are choosing to provide high speed Internet as a stand-alone product. When TMCs offer stand-alone Internet, it is generally referred to as “Naked DSL,” which means that the service offering does not include voice telephone service. Even when voice is included at a modest price, customers have convinced themselves that it is an extra they don’t need and choose to go with a competitor. While the FCC pays lip service to promoting broadband deployment in rural areas, Universal Service Fund (USF) support is not available when a company provides “Naked DSL.” The service offering must have a voice component. Thus, to retain the customer, the company is forced to forego USF support and make an uneconomic choice for its members.

To some extent, the issue is related to pressure being felt by the National Exchange Carriers Association (NECA). NECA was founded in 1984 to administer the distribution of access charges from long distance carriers. After the passage of the Telecom Act of 1996, NECA assumed responsibility for administering the USF pool of funds. At a recent meeting of the National Telephone Cooperative Association (NTCA), representatives from NECA made a presentation about the operations of the NECA pool. In reality, it was really an effort convince members of the continued value of pool membership.

The problem is that pool members are subject to different types and levels of competition. To a large extent, NECA sets tariff rates the same way it always has done. Generally, it looks at a company’s cost and a company’s demand. Then, it divides the units of demand into the cost to develop a tariff rate. Because costs are increasing and demand is decreasing, the tariff rates are driven higher. That is the exact opposite from how a competitive market should work. Generally, if demand goes down, one might expect that prices would go down rather than up.

In fairness to NECA, it understands the competitive pressures that TMCs are facing. To help address those issues, it has created a system of rate banding, which attempts to more closely approximate what is happening in competitive markets. However, NECA is forced to follow certain rules and can only do so much. In the meantime, the FCC has yet to finalize the USF rules that apply to smaller, rate of return companies. In the meantime, the uncertainty continues and issues about rural broadband deployment continue to fester.


North Carolina Prepares for Next-Gen 911


The way people communicate has changed. Texting, instant messaging apps, social networking sites, and other technologies have replaced voice calling as the dominant means of communication. However, while a few areas have texting capability, E-911 is largely limited to voice service. Next-Gen 911 will change that and provide people the ability to access emergency services using multiple technologies. This comes with significant benefits to citizens and first responders. Imagine witnessing an accident and being able to take a photograph or video and transmit it to a 911 operator. First responders would know the circumstances of the accident before arriving at the scene. If someone is injured and unable to speak, they could contact 911 by text. Next-Gen 911 brings our emergency system to an IP data based system, which matches the development of our communications infrastructure.

Of course, updating the E-911 network does not come without a cost. The federal government has committed approximately $6.5 billion for use in building a Next-Gen 911 network. However, this will fall far short of covering the costs across the fifty states. In North Carolina, the current E-911 system costs an estimated $70 million per year to operate. Until the transition to Next-Gen 911 is complete, the State will have to operate the current system while building the Next-Gen system. The total amount of the E-911 Fund is roughly $80 million per year. This $80 million comes from a fee attached to customer bills of service providers. Simply stated, even with some federal money, the current funding level is insufficient to cover the cost of both systems while the new system is being built.

This year the General Assembly took a step toward fixing that problem by directing 10% of the E-911 Fund per year into a Next-Gen 911 reserve fund. This policy was championed by Rep. Jamie Bowles and Sen. Andrew Brock, who represents a portion of Yadkin Valley TMC’s operating area. This is certainly a step in the right direction, but with funding tied to access lines, and access lines still in decline, the General Assembly may be forced to explore new mechanisms for E-911 funding. Since E-911 was established in 1989, it has been a constant issue of legislative concern and that is not likely to change.






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