FCC Offers Small ISPs a Boost, but a Bigger Setback Looms

Big telecom companies want to end a 22-year-old requirement that they allow upstart rivals to tap into their facilities and equipment.

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Small internet providers expect a helping hand from the Federal Communications Commission Thursday, a move that could spur competition and perhaps lower prices. But the commission is also considering a more sweeping proposal that would hurt upstarts to the benefit of industry giants like AT&T.

Both issues revolve around how much access upstarts should have to facilities and equipment owned by their bigger rivals. Thursday’s vote is about arcane rules for moving wires on utility poles. The bigger issue, which the FCC might not resolve until next year, is about access to telecom companies’ switching stations.

USTelecom, a trade group for the big telcos, has asked the FCC to suspend a part of a 1996 law that requires its members to grant upstarts access to those switching stations. Smaller internet providers view the proposal as an existential threat.

Many smaller internet providers rely on access to rivals’ networks to offer their service. Some simply resell telcos’ DSL internet services. But others, such as Mammoth Networks, based in Gillette, Wyoming, have installed additional equipment to offer internet service over other companies’ unused copper or fiber networks. Mammoth, for example, leased copper lines meant for security-alarm systems to build a DSL service in Douglas, Wyoming, before the local telephone company offered DSL, says cofounder Brian Worthen. In that way, these smaller broadband providers are a bit like dial-up internet providers: Telcos provide the underlying cables, but not the internet connection. In other cases, Mammoth helps stitch together disparate fiber networks owned by other organizations. Sometimes that means digging trenches to fiber-optic cables to link towns to nearby internet “backbone” connections, as the company did in Bailey, Colorado.

In their appeal to the FCC to cut off access for upstarts, big telecom companies are employing an unusual provision of the 1996 law. When Congress enacted the measure, lawmakers expected the market to grow more competitive over time. So they included a provision that allows companies to petition the FCC to “forbear” enforcement of some of its rules; USTelecom is now asking for that forbearance.

“It no longer makes sense to single out a few companies and make them share their networks with their competitors,” USTelecom President Jonathan Spalter wrote in a blog post in May. “In fact, it’s unfair.” USTelecom did not respond to a request for additional comment.

But the FCC’s reports find the broadband market lacking in both competition and coverage, especially in rural and tribal areas. According to a report released earlier this year, only about 69 percent of the population in rural areas had access to a home broadband provider offering speeds of 25 Mbps or more in 2016, compared with 98 percent in urban areas. Only 64 percent of tribal populations had access to the same speeds. Another report released this year, also covering 2016, found that nationwide, only about 56 percent of census blocks had more than one broadband provider advertising such speeds.

In its request to the FCC, USTelecom argues that telcos would invest as much as $1.8 billion and create at least 2,200 new jobs if they didn’t have to share their networks with competitors.

But Chip Pickering, CEO of the industry group Incompas, which represents many smaller telecom companies, says many communities rely on broadband connections from firms like Mammoth, which built internet services in rural areas where larger telcos were reluctant to invest. If those companies lose access to the telcos’ infrastructure, their businesses would be in jeopardy.

“We put a lot of investment into places knowing that we’d have access to that infrastructure,” says Worthen, the Mammoth cofounder.

It’s not that the smaller providers want to keep leasing other companies’ infrastructure forever. Many companies use leased infrastructure to “bootstrap” their businesses before building their own infrastructure. Sonic, a San Francisco-based broadband provider, started out reselling DSL connections, but now offers service in many parts of San Francisco based on a fiber-optic network it built itself.

In fact, smaller providers have little choice but to build their own networks, Jasper says, thanks to rule changes the FCC passed last year that would allow telcos to retire their copper networks with little notice. Companies like Sonic are now racing to build their own fiber networks before they lose the infrastructure they depend on. If the USTelecom petition is granted, the bigger firms could cut off that access even sooner. And without the threat of upstart rivals, the established players would invest less and charge more, he says.

‘This is a knife at the throat of the entire competitive industry.’

Dane Jasper, CEO of Sonic

It’s hard to know where the FCC will land on the issue, because the proposal originated from outside the agency. Most issues the agency considers come from a commissioner, often Chair Ajit Pai, and so have some built-in support.

Jasper says he’s confident that the FCC will reject the order. After all, the agency will likely side with smaller providers on the utility-pole issue.

Electronic Frontier Foundation lawyer Ernesto Falcon thinks the fate of the proposal may turn on whether congressional Republicans press the FCC on the issue. And that will depend on how much political will smaller providers can muster before the FCC votes, likely next year.

The utility pole issue is less controversial. It stems from complaints by smaller internet providers that bureaucracy is a big barrier to more broadband deployment. Let’s say a small internet service provider wants to offer a fiber optic internet service in a new neighborhood or town. Before it can attach its cables to utility poles, the existing cables usually need to be rearranged. The problem is that in many places, there’s no single company to do that work. Instead, each company that owns a cable has to send someone to move its cable, and only its cable, on each pole. That might mean the local telephone company has to go out and move a cable, then the cable television company has to go out and move its cable. Wireless providers are involved too, because they often use cables on utility poles to connect their cellular towers.

This process, called “make ready,” can take months or years, since, under federal law, each company involved has 60 days to move its cables. That means it can take a long time for a company to build a new network. It also gives incumbent providers time to upgrade their networks, since they know a new competitor is coming to town.

The proposal scheduled for a vote on Thursday would eliminate this byzantine process and allow a new provider to do the make-ready work itself, a concept known as “one touch make ready.” In the proposal, the FCC says the concept would not only make it easier for broadband providers to enter new markets, but would reduce road closures and improve public safety by reducing the work done to the poles.

“These are long overdue modifications to a very inefficient model that has stymied telecom infrastructure improvements by creating barriers to new entrants,” says Monica Webb, who handles government relations at Ting Networks, a company that offers fiber-optic internet in parts of Virginia, North Carolina, and Maryland.

Any change by the FCC would apply only in 30 states. The other 20 states, including California, have their own rules regarding access to utility poles. Jasper says the FCC order could serve as an example for state regulators that want to pass their own reforms.

One touch make ready will help smaller providers, but it will also help larger phone companies in some cases, says Webb, the Ting Networks executive. As AT&T and Verizon deploy 5G, they’ll need to upgrade their networks and install many small cell towers. Because their cell towers are often connected to cables strung on utility poles, streamlined rules for accessing those poles would help the big guys as well as the little guys.

As much of a boon as one touch make ready would be for smaller providers, Sonic CEO Dane Jasper says it would be outweighed by the harm of the FCC granting the USTelecom petition. That’s because Sonic, like many other broadband providers across the country, is heavily dependent on leasing infrastructure from other companies. “This is a knife at the throat of the entire competitive industry,” Jasper says. “There is nothing that would cut more deeply than this if it were granted.”


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