Will USF Funds Subsidize AT&T Buildout?

Posted by Sam Churchill on

Capitol Hill is concerned that the government could end up footing the bill for an expensive promise from AT&T, reports The Hill. Congressional aides are concerned AT&T could use Universal Service Fund money to meet the LTE buildout goals as part of its proposed $39 billion acquisition of T-Mobile USA, says Fierce Wireless.

The FCC’s $8 billion USF program is now moving from guaranteeing voice services for everyone, to guaranteeing data services for everyone.

The high-cost USF program, which subsidizes the high costs of providing telephony service to rural areas, typically accounts for about 55 percent of the fund’s annual disbursements.

USF reforms are expected to hurt rural wireless carriers, by reducing payments they have received from the fund. Instead, it will fund mobile broadband deployments in rural areas. That could mean 700Mhz expansion by AT&T, T-Mobile, and Verizon — paid for by U.S. citizens on their phone bill.

AT&T has argued that it will not need USF funds to meet its commitment to deliver LTE coverage to more than 97 percent of the U.S. population, covering an additional 55 million more Americans than AT&T’s current LTE plans.

Sen. Amy Klobuchar (D-Minn.), a watchdog of the wireless industry and a member of the Commerce and Judiciary committees, is concerned about the possibility of AT&T using government subsidies to pay for its broadband promise.

AT&T bristled; “Our commitment to bring broadband to an additional 55 million Americans is not contingent on the receipt of USF money,” Joan Marsh, AT&T’s federal regulatory vice president, told The Hill. While not ruling out the idea that USF money could help the buildout, she said it would be “speculative” to talk about the details at this point.

David Kaut, a telecom analyst at Stifel Nicolaus, said that if federal regulators decide to approve the deal, it’s possible they would add a condition to cement AT&T’s wireless pledge and to prevent AT&T from using service fund money to pay for its wireless expansion.

Sprint and Verizon both accepted such conditions in their own wireless mergers.

Verizon, a subcontractor in the giant $10B dollar federal IWN project was expected to install thousands of 700 MHz towers in every community in the United States. As I speculated 4 years ago; that might — in effect — act as a cross-subsidy to their commercial 700 MHz network. The communications network would use archaic Project 25, 2-way radios, and be used only by federal law enforcement agencies (not local first responders).

The Integrated Wireless Network (Washington Post story) — was severely criticized by the Inspector General. It is a narrowband voice network and the radios cost $3500-$5000 each.

Now it looks like APCO is winning the “D Block” for an LTE-based public safety broadband network. This is a disaster waiting to happen.

The government doesn’t have the $15 billion to build out a dedicated, nationwide, broadband network for first responders and the billions more to buy radios. If all the money from a broadcast TV auction were funneled to this dedicated network, it still seems unlikely to happen due to inter-agency jurisdiction disputes. Just like the Bay Area’s 700 MHz Net, Oregon’s $600M Public Safety Network and New York’s Cancelled Statewide Network.

Feds, state, transportation, police, fire, medical and municipalities will all claim they have preemptive “right” to be spectrum hogs. It will be in court for a decade.

When a real disaster happens – like a 9.0 earthquake – the “public service network” will not be there – or spotty at best. You can plan on it.

The Public Safety Alliance, a nationwide alliance of public safety associations, says that Congress could allocate 10MHz of spectrum on the 700MHz band to public safety agencies by the end of the year. But Motorola is being optimistic.

House Energy and Commerce Committee Chairman Fred Upton (R-Mich.) and Ranking Member Henry Waxman (D-Calif.) have found reports of Motorola having 80% share of the public-safety narrowband equipment marketplace to be “troubling.”

The FCC has been right all along. The 700 MHz “D Block” should be auctioned — and shared with first responders. It delivers broadband everywhere. The Public Safety Alliance lobby is counter-productive to public safety. It’s all about money — not public service.

President Obama wants to spend $18 billion in federal funds towards his wireless goals.

  • Fire, police and other emergency responders would get $10.7 billion in federal support for a dedicated public service network.
  • About $5 billion, currently used for rural phone subsidies, would be repurposed to build cell towers and backhaul networks to towns without mobile broadband services.
  • An additional $3 billion would go to research and development for wireless technologies.

DailyTech has analysis of the Administration’s broadband plan. It’s not a bad plan – if the 700 MHz “D-Block” were shared by the public and first responders. Otherwise, providing another 3% of Americans with broadband, by extending penetration from 95% to 98% (9.2 million people), is going to be very costly, according to critics like House Energy and Commerce Chairman, Fred Upton.

The FCC wants to target USF monies for cost/effective Universal Service in rural areas. It won’t pencil out without shared 700 MHz service. The FCC hopes to get cellcos – not taxpayers – to build the “D-Block” to hardened milspec on their own dime — if they lowered the bidding floor and allowed dual-use.

That’s what the FCC and the 911 Commission have determined. That’s why they developed a different plan from the Administration’s. The FCC’s plan would auction the D-Block and create partnerships with cellcos to deliver broadband to rural areas.

Everyone benefits they argue, including first responders, residents and taxpayers.

The FCC’s plan would require the D Block licensee to provide a network that covers 75% of the U.S. population by the end of the fourth year, 95% of the U.S. population by the end of the seventh year, and 99.3% of the U.S. population by the end of the tenth year.

APCO and the Obama administration are just plain wrong.

Related Dailywireless articles include; The National Wireless Initiative, D Block Gets a Hearing , White House: D-Block to Police/Fire, Is More Spectrum Needed?, Motorola + Verizon for 700MHz Public Safety, White Space: Now With TD-LTE?, FCC boss: What Spectrum Squatting?, Phoney Spectrum Scarcity, Oregon’s $600M Public Safety Network Likely Killed, Oregon’s Public Service Network: $100M Over Budget, Bay Area 700 MHz Net in Altercation , SF Announces LTE First Responder Net, New York Cancels Statewide Wireless Network, M/A-COM to NY: We’re Good, FCC: Interoperability on 700 MHz Band, Riot in D Block, SkyTerra 1 Launched , Why Cops Don’t Just Use Cell Phones, LightSquared + SK Telecom, The 700MHz Network: Who Pays?, Public Safety: Show Us The Money, Clearwire to Test LTE, Apps for the City, Public Safety Spectrum Grab, Open Range Gets Lightsquared Spectrum, The National Broadband Plan

Posted by Sam Churchill on Wednesday, May 11th, 2011 at 9:43 am .

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