This summer, Washington boiled over as our government has tried to bring the national debt under control and establish greater fiscal responsibility with the public purse.  While there has been a lot of partisan bickering, all sides accept that we must be disciplined in not allowing government programs to grow unrestrained.  All regulatory agencies have been told to keep a cap on spending wherever they can.

The Universal Service Fund (USF) is not a direct expenditure by the government, but the FCC does determine how much money is collected and how it is distributed to further the goal of ubiquitous and affordable communications service.  Like any other federal program, the Commission has a responsibility to ensure the Universal Service program does not balloon, but instead is prudently and effectively restrained.

For at least a decade, policymakers have agreed that our system of subsidizing the operation and maintenance of rural communications networks is in critical need of reform.  Our current support mechanisms – USF and intercarrier compensation (ICC) – were first established decades ago to ensure that every American had access to basic telephone service.  That national priority has long been met, but these programs still chug along propelled by past history rather than the facts of today’s reality – rewarding legacy telephone companies with financial support even where such companies face competitors who enjoy no such subsidies.

Chairman Genachowski deserves credit for identifying USF and ICC as ripe for reform and for setting an aggressive timeframe for transforming these programs into ones that can help accomplish our nation’s telecommunications goals of tomorrow while limiting further taxpayer exposure.  When completed this initiative will be a tall achievement that deservedly will burnish his legacy, but only if the Commission is courageous enough to put this bloated program on a budget.

The People’s Money Should Be Spent Wisely

Limiting the growth of USF is important for one reason above all; consumers, not companies, ultimately pay for subsidizing this program. Hearty portions of a consumer’s monthly telecommunications bill are charges that go to support USF.  Just pull out your next bill and take a look.  If the Commission fails to meaningfully constrain the USF program, consumers will inevitably see their bills rise.  In these depressed economic times, government should do everything it can to limit the economic burden of government programs on consumers, even programs that serve worthy goals, as does USF.

To his credit, Chairman Genachowski has committed that the Commission will reform USF without increasing the burden on consumers.  We fully agree with his strategy to phase out the old, inefficient programs and introduce a regime that will be more carefully targeted to the few areas of the country where marketplace forces have been insufficient to attract investments in broadband.  His three fellow Commissioners deserve credit for joining the Chairman to establish a “fiscally responsible path that provides incentives for efficient operations and accountability for every dollar spent” and “contains the size of the Universal Service Fund.” (Comments taken from this post from last month on the FCC blog.)

As the Commission moves toward a vote on USF reform later this year, we call on the Chairman and the Commissioners to maintain their pledge of fiscal discipline.  In particular, as noted in a letter that NCTA and ACA recently submitted to the FCC, the Commission should establish constraints on the size of the high-cost program that are enforceable and not merely aspirational.  The goal of universal broadband access can be achieved without placing additional burdens on American consumers, but achieving that result will only be possible if the Commission establishes clear, enforceable limits on how much money it will collect and distribute.

The Federal Communication Commission’s new report, Measuring Broadband America, confirms that cable operators are delivering world-class services to their customers.

Based on a rigorous testing process, the Commission found that, on average, during peak periods (7:00 – 11:00 p.m. local time), cable-based services delivered 93 percent of advertised download speeds and 108 percent of advertised upload speeds.  When off-peak performance is included as well, many of the cable operators in the test delivered more than 100 percent of the advertised download speed and the majority delivered more than 100 percent of advertised upload speeds.  To the extent the National Broadband Plan suggested there might be a significant gap between actual and advertised speeds, the report dispels those concerns and makes clear that “actual download speeds are substantially closer to advertised speeds” than was asserted previously.

The positive results reported by the Commission reflect the cable industry’s long track record of network investment and innovation and our focus on providing services that are attractive to consumers.  As with Commission surveys showing extremely high consumer satisfaction levels, the results of the SamKnows testing confirm that marketplace forces are working for the benefit of consumers.

The testing also demonstrates the significant consumer benefits associated with PowerBoost technology, which is used by many cable operators.  PowerBoost enables consumers to receive bursts of additional throughput when there is excess capacity in the network.  As the Commission’s report demonstrates, PowerBoost increased download performance by as much as 52 percent during peak periods for some offerings.

Beyond the substantive importance of the results, the SamKnows testing is equally important for the procedural lessons it teaches.  The Commission faced a challenging task in developing a testing mechanism that could accurately measure the performance of different types of ISP networks.   To the Commission’s credit, it recognized that the best way to develop such a process would be to work in a collaborative manner with the ISPs whose networks were being tested, as well as academics, equipment manufacturers, consumer groups and others.  We appreciate the hard work and dedication of the Commission staff throughout this process.

It is important to keep today’s report in perspective.  The test involved only a small fraction of the ISPs operating in the United States (and only covered wireline providers), each ISP had only a small number of test panelists, and the report covers only one month of performance data.  Further analysis of the data is needed to ensure that the testing process fairly and accurately measured the performance of each ISP.   We look forward to reviewing the report in more detail and continuing to work with the Commission staff and other interested parties on these issues.

In an op-ed in today’s Washington Post, Karen Kornbluh, U.S. ambassador to the Organization for Economic Cooperation and Development, and Daniel Weitzner, White House Deputy Chief Technology Officer for Internet Policy, made a powerful case for building an international consensus around the benefits of an open, interconnected Internet.

According to Kornbluh and Weitzner, the Internet is such a powerful engine of economic and social advancement because no centralized authority governs it and no nation owns it – which “means that nations that choose to take a heavy-handed approach to regulating the Internet can reduce its value for every other nation and user.”

In particular, Kornbluh and Weitzner argue that “[t]he first threat is posed by some governments and international institutions intent on imposing pre-Internet-era telecommunications regulatory schemes to provide them control over the flow of information (and money) they enjoyed in the old days of the monopoly phone company.”

We couldn’t agree more.  In this country, the FCC opened a docket to examine whether broadband Internet access service should be reclassified as a pre-Internet-era common carrier service under Title II of the Communications Act.  NCTA and others pointed out that imposing a top-down Depression-era regulatory structure on modern broadband facilities would not only be unlawful but would depress broadband investment and job-producing economic growth at the worst possible time.

Fortunately, the FCC declined to reclassify broadband Internet access service in its Open Internet Order.  Unfortunately, the reclassification docket was expressly left open.

If we want other nations to reject the idea of imposing old-style regulatory structures on the Internet, there’s no place to start like home.  It’s time for the FCC to close the Title II reclassification docket.  That would prevent a future Commission from turning back the clock, and send a clear message to the rest of the world.

Back in June, on the eve of NCTA’s annual conference, it was clear that a theme had emerged for The Cable Show.  As I wrote on this blog, we were entering “a new world in which Consumer Electronics, Information Technology and Hollywood” have come together into order to deliver our customers new and powerful ways of consuming entertainment and information.

To be more technical about it, as industry observer Leslie Ellis put it:

…we’re moving to a world where stuff can be done without set-top boxes, at least as they exist in hardware. Now, it’s set-tops; next, it’s gateways that bridge between set-tops and cable modems, and ultimately, it’s video delivered completely over IP, from the network, to the end devices.

I bring this up because NCTA’s President and CEO Michael Powell sent a letter last week to FCC Chairman Julius Genachowski about these new developments and what they mean for our ability to achieve a fully competitive and innovative retail video device marketplace.

This issue has been discussed for some time, but 2011 has brought a host of services entering the marketplace.  See some of our previous posts:

• Consumers Reaping Benefits of Smart Video Device Revolution
• Connected TV… Here to Stay

All of that was before The Cable Show. As Michael Powell’s letter pointed out, the various demos and panels from our event help show how the cable industry “is providing American consumers with powerful, personal, and portable services and networks that support unprecedented mobility of content to multiple devices both in and out of the home.”

The Cable Show demonstrated that Congress’s and the Commission’s video device goals are already being achieved in the marketplace.  …there is broad-based momentum in the cable industry to deliver cable services to consumers on any device.

Today, consumers have more sources of video programming and content on more devices than ever before, and the choices are only growing through a variety of market-based approaches: smart TVs, iPads and other tablets, TV from the “cloud,” set-top boxes that can combine TV with Internet content, the growing role of home networking and connected devices. All of these approaches are playing a role.

As quoted in this write-up in Multichannel News, NCTA is suggesting that regulatory efforts intended to encourage innovation may instead impede.

“The problem that remains in this marketplace is not the need for a single guiding regulatory prescription,” like the FCC’s proposed AllVid solution, wrote Powell. “The marketplace is at a critical juncture, inviting participants to make major bets and even more major investments in technology to meet rapidly developing consumer demand with rapidly changing technological tools. This kind of innovation is about risk taking. The environment that invites the greatest risk taking is one with the certainty that regulators will not step in and displace new technologies or new investments.”

FOOTNOTE: There was a lot of activity at The Cable Show along these lines, but you get a taste of what’s happening in this area, watch some videos from The Park, such as the demos from Comcast, Cablevision and HBO.

Although perhaps not as certain as the beauty of the cherry blossoms or the excitement of Opening Day at Nationals Park, the debate over the FCC’s Section 706 Report is an annual rite of spring in Washington these days.

In the Section 706 Report, Congress requires the Commission to “determine whether advanced telecommunications capability is being deployed to all Americans in a reasonable and timely fashion.”  In the first five reports, the Commission found that deployment was reasonable and timely.  Last year, however, in the Sixth 706 Report, the Commission for the first time made a negative finding.

What happened in that fateful year?  Nothing materially different from the year before, except that the Commission moved the goal posts – instead of conducting a year-over-year assessment of our relative progress, the Commission found that progress was not “reasonable and timely” because 100% of Americans do not yet have access to broadband.

We have no quarrel with the Commission’s laudable sentiment, but as we noted at the time, that aspirational goal is not the litmus test Congress envisioned within the 706 inquiry.  Indeed, we are yet to reach this level of success for far older technologies like electricity and phone service, and in other contexts the Commission has plainly acknowledged that delivering wired broadband service to the last 2-3 percent of homes is so expensive as to be untenable, even with government subsidies.

Unfortunately, recent press reports indicate that the Commission is again considering a negative finding in its upcoming Seventh 706 Report. From NCTA’s perspective, the news on the deployment front continues to be extremely positive.  On the cable side, Comcast’s recent announcement that it is offering 105 Mbps service to 40 million homes is just the latest in a series of announcements from cable operators over the last year that support the view that investment is continuing and that deployment of the latest technologies is growing.  At year-end 2010, next generation speeds of 50 Mbps or faster were offered to more than 80 million homes by cable operators, and robust current generation cable broadband was available to more than 123 million housing units.

To the extent the Commission’s conclusion relies on data collected in connection with the National Broadband Map, it is widely acknowledged that the initial version of the map almost certainly understates broadband availability in the U.S. Notwithstanding these problems, the map shows overall broadband availability at roughly 95 percent and, as some observers have suggested, the actual figure may be as high as 97 percent.

Consequently, while improvements to future versions of the map offer the prospect of a more definitive source of availability data, the map should be viewed as a supplemental source for the current 706 inquiry that bolsters, rather than undermines, a conclusion of reasonably and timely deployment.

Indeed, far from lagging the world, the United States continues to lead, and for the second year running ranks 5th in the World Economic Forum’s Networked Readiness Index – a measure used over the last decade to gauge the degree to which developed and developing countries across the world leverage information and communication technologies (ICT) for enhanced competitiveness.

Although we may have to “agree to disagree” with the Commission about what qualifies as “reasonable and timely” broadband deployment, we are in complete agreement on the best strategy for moving closer to our shared goal of universal broadband availability.

In last year’s 706 report, the Commission identified certain key recommendations from the National Broadband Plan as critical to promoting investment and accelerating deployment, including pole attachment reform and USF reform.  NCTA has fully supported these recommendations.

With respect to the former, the Commission has done yeoman’s work recently in adopting strong pole attachment rules.  With respect to the latter, the Commission has rightly teed up critical reforms that are needed to update our existing subsidy system to better reflect the realities of today’s competitive communications marketplace, including proposals to target subsidies for broadband deployment to unserved areas.

While such changes do not offer a guarantee of reaching all Americans with broadband, they do offer the prospect of tangible progress that we should all agree is worthy of positive recognition.