Stevens telecom bill (II): Follow the money
The Universal Service Fund: it's central. It gets federally required payments from providers of telecommunications services and allocates those monies to local providers who serve high-cost areas, low-income households, libraries, schools, and rural health care providers.
The fund is administered by an independent nonprofit corporation (the Universal Service Administrative Company), which is regulated by the FCC. An enormous amount of money flows through USAC's books and out to the states: $7.3 billion estimated for 2006.
In 2005, $158 million went [pdf] to Alaska, Stevens's home state; $131 million to Arizona (McCain); $83 million to Montana (Burns); $242 million to Mississippi (Lott); $576 million to Texas (Hutchinson)…(all members of the Senate Commerce Committee).
As traditional telecommunications carriers (the Bells) lose revenue to VoIP providers, the amounts they'll be able to shuffle to the states and to gravy-train rural carriers will continue to diminish. (This is a very complicated story, full of cross-subsidies and hidden incentives, so forgive me if in telling it simply I'm missing something key.) It's generally accepted that the Universal Service Fund mechanism is broken and isn't necessarily serving the people it was designed to serve. But that's not the important thing from a political perspective.
The important thing from a political perspective is that the money has to continue to flow. So it has to come from somewhere.
The Stevens draft bill says clearly that new actors will need to contribute to USF funds: all broadband service providers (including municipal providers of anything faster than 200 kbps, and cable broadband providers) and all IP-enabled voice service providers.
Who's an “IP-enabled voice service” provider? Answer: anyone who makes real-time 2-way voice communications available to the public, whether for free or not, as long as the service is capable of connection (both ways) to the traditional phone network.
This definition includes Skype, Yahoo! Messenger, and any gaming software that allows connection to traditional phones.
Every service in this category will be assessed USF fees. The bill doesn't say how much. But it does say that the FCC can base contributions on “revenue from communications service” — in other words, if Skype is successful, the USF should benefit too!
(This is reminiscent of the Nokia director who was assessed $100,000 for a speeding ticket. Finns do everything very fairly.)
Other bases for collection under the bill are “working phone numbers or any other identifier protocol or connection to the networks” (IP address blocks held? number of cable connections?), or “network capacity” (successful muni wi-fi or cable network?).
It will be very hard for legislators to ignore the possibility of an enormous revenue-save for a vital piece of pork within their districts. The moral arguments in favor of USF are strong. Explaining how broken the program is takes more than one sentence.
This will be a tough one. To the extent network neutrality (which also takes more than one sentence to explain) might scuttle a bill that secures this new source of funds, legislators will likely follow the money and scuttle network neutrality instead.
Stevens telecom bill (I)
It's 135 pages long, and the first Title is: “War on Terrorism.” Sen. Stevens (R-Alaska) has issued his draft Communications Act of 2006, which is based on the structure of (and amends) the existing Communications Act. Here is his floor statement introducing the bill (only five pages long). He makes clear that this is a draft, and that he'll be holding hearings to take suggestions.
The draft contains a reporting requirement intended to address network neutrality concerns, but is careful to say that no new rulemaking authority will be accorded the Commission even if these reports show that there are problems. Here is the reporting requirement:
Beginning 1 year after the date of enactment of this Act, the Federal Communications Commission shall report annually to the Senate Committee on Commerce, Science, and Transportation and the House of Representatives Committee on Energy and Commerce for 5 years regarding—
(1) the developments in Internet traffic processing, routing, peering, transport, and interconnection;
(2) how such developments impact the free flow of information over the public Internet and the consumer experience using the public Internet;
(3) business relationships between broadband service providers and applications and online user services; and
(4) the development of and services available over public and private Internet offerings.
Here's the part where the Commission's authority to do anything about these developments is sharply limited:
(b) DETERMINATIONS AND RECOMMENDATIONS.—If the Commission determines that there are significant problems with any of the matters described in subsection (a) the Commission shall make such recommendations in its next annual report under subsection (a) as it deems necessary and appropriate to ensure that consumers can access lawful content and run Internet applications and services over the public Internet subject to the bandwidth purchased and the needs of law enforcement agencies. The Commission shall include recommendations for appropriate enforcement mechanisms but may not recommend additional rulemaking authority for the Commission.
The distinction between “public” and “private” internet services is clear. The “public” internet is the internet that won't be prioritized, and it will continue to be available to the extent private broadband providers make it available (subject to the needs of law enforcement). The Commission wouldn't have the authority under this Act to do enact a generally-applicable rule covering degradation of carriage, but it might be able to (sometime in the distant future) bring an enforcement action about these issues — although it's not clear from the bill what standard such an enforcement action would be enforcing.
This question is down the road and not as important, but: What needs of law enforcement? Is this the place where law enforcement says that encryption is unlawful?
In other news, Sen. Stevens's floor statement says that municipalities and local governments should be able to “offer their own broadband service, so long as they do not compete unfairly with the private sector.” The bill makes municipal provision of broadband quite painful — a requesting private provider has to be allowed to create a broadband service using the same trenches, conduit, and locations, private providers get a right of first refusal before a municipality can provide broadband, and the municipality can only do it by itself if a neutral third party says that the private broadband won't be cheaper. Very elaborate.
There's also an elaborate rebirth of the broadcast flag — but more on that tomorrow.