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[ NNSquad ] Plan Result: Broadband prices up

----- Forwarded message from David Farber <dave@farber.net> -----

Date: Tue, 16 Mar 2010 05:28:40 -0400
From: David Farber <dave@farber.net>
Subject: [IP] Plan Result: Broadband prices up
Reply-To: dave@farber.net
To: ip <ip@v2.listbox.com>

Begin forwarded message:

From: Dave Burstein <daveb@dslprime.com>
Date: March 16, 2010 3:58:53 AM EDT
To: dewayne@warpspeed.com, Dave Farber <dave@farber.net>
Subject: Plan Result: Broadband prices up

Dave, Dewayne 
I normally would hold this for more checking but I think whether the broadband plan raises prices or makes broadband miore affordable is a crucial question and the FCC is obscuring the facts. I'll correct and update but didn't want to hold. I hope they prove me wrong but this is as close to the truth as I can get. 
Broadband plan, 4 a.m. Tuesday

3:29 a.m. It looks like the broadband plan will increase prices, not make them more affordable, for most Americans and provide little help for the poor. The 376 page plan came out at ten after midnight and the relevant parts are vague and obscure, so I may have errors here. But since the plan puts "affordable" in the first goal, I think it's crucial the reporters in D.C. get the answers and include them in their reporting. The FCC didn't answer my questions today on affordability. The facts are either buried or simply ignored in the 376 pages, apparently hoping to confuse reporters to miss the price increases. The numbers below are the best I can come up with based on three hours reading and no answers from the FCC. I'll update them throughout the day, especially if the FCC provides any of the relevant facts. 

We already know the plan is hollow on high speed deployment (Before 2020, 100M homes will get 100 megabits without the plan according to Columbia/CITI and the cable companies on wall street) and  take rate (90% will almost certainly be subscribed without the plan because data will be built into every mobile phone).  

So improved affordability is the key claim I was hoping to see results on. Here's what I found. 

Net results of broadband plan: $5-10 month increase for many, probably most, families
Although the first and third goals of the plan speak of affordable, the actual plan text indicates that many families, almost certainly including a large majority of the poor, will pay more rather than less because of the plan. 

It's buried and obscured, and these are only estimates.
It is seriously disingenuous of the plan not to provide the data here, especially since reporter after reporter has ask the FCC how much they would bring down prices and make broadband more affordable for the poor. 

I have made the best estimates I can, and sent them to the FCC for factchecking. Earlier on Monday, seeing the plan spoke of affordable in its first goal, asked Julius how much prices would come down because of the plan, overall and for the poor. 

There are good things in the plan as I report elsewhere, but raising the price of broadband and telephony is simply unacceptable if affordability matters. That's especially true because as I understand the plan the only subsidy for broadband for the poor is achieved by subtracting the funds from the subsidy for voice for the poor. (Below, but very hard to understand in the text.)

I hope Blair or Julius provide better estimates than this by late Tuesday. If in fact families pay more rather than less because of the plan, then that needs to be a major part of every reporters story with the best data they can get.

1) Connections - The Internet Tax (?$2-7/family first estimate)
P 147: the current contribution base should be broadened, though with differing views on how to proceed. Some parties urge the FCC to expand the contribution base to include broadband revenues,114 while others urge the FCC to assess broadband connections through a hybrid numbers- and connections-based approach.115

"Connections" is a euphemism for a "tax" on every Internet connection. There's no reason Internet connections shouldn't be taxed like anything else, but this money mostly goes to subsidize carriers, much of which is wasted by many academic studies. It's disingenuous to suggest this increase isn't implicit in the plan; anybody competent looking at the numbers know they won't add up without it.

There is absolutely nothing in the plan suggesting the amount. Working from earlier FCC comments ($1/month), a family with one net connection, one home phone and one mobile will pay $3/month. Reporters including Karl Bode have suggested it will be higher. I've also calculated the total required to meet the suggested subsidies to the carriers in the CAF and it suggests a high amount here.

My comments on the totals involved, and hence the taxes or fees added, are informed by discussing the details of USF with an FCC Chairman and many others. 

2) Increased monthly bills (SLC) ($2-4/month, first estimate)
page 148 To offset the impact of decreasing ICC revenues, the FCC should permit gradual increases in the subscriber line charges (SLC)

The Subscriber Line Charge (SLC) is one of those funny charges on U.S. phone bills. The carriers sometimes call it "FCC line charge" but all the money goes to the carrier. The $2-4 estimate is based on the figures in the FCC ICC/USF proposals from November, 2008. The plan provides no estimate for the amount. Kevin Martin offered a comprehensive proposal in 2008 that was blocked by the Democrats Copps and Adelstein. At minimum, Commissioner Copps owes it to the public to make sure the USF/ICC part of the plan as implemented is as consumer-friendly as the proposal from Republican Commissioner Martin.

3) Increased monthly bills (rebalancing of local rates) ($3-10/month, first estimate, only affecting some) 
page 148 To offset the impact of decreasing ICC revenues, the FCC should permit gradual increases in the subscriber line charges (SLC)

"Rebalancing" is a euphemism for raising basic local phone rates. The plan does not provide an estimate of how much or who would be affected, merely noting that some people pay $8-12/month. If all of those were raised to $15-18/month (as Californai and New Jersey propose in a different context), that would be $3-10 increase for those homes and a smaller increase for others.  

4) Counterbalance: Will carriers getting this money pass on some to consumers?
With a perfect market, competition would force much of the money carriers collect from these increases to be offset by price reductions. The plan is explicit that we have only weak competition for high speed Internet and that isn't likely to change. There is no reason to assume these increases will not simply go to the bottom line at most carriers.

Minimal help for the poor (apparently)
"Cost is the leading barrier to adoption," Page 170

70% of those eligible for lifeline service get no benefit from the badly run program, an underreported scandal. So if prices go up over-all, 70% of the poor would not be helped even if there were an increase in the lifeline program to cover broadband. As far as I can understand, the lifeline broadband will be funded by reducing the subsidies for phone service for the poor. 

Recommendation 9.1: The Federal Communications Commission (FCC ) should expand Lifeline Assistance (Lifeline) and Link-Up America (Link-Up) to make broadband more affordable for low-income households. The FCC and states should require eligible telecommunications carriers (ETC s) to permit Lifeline customers to apply Lifeline discounts to any service or package that includes basic voice service. (Page 172)

I don't see any additional funding provided, which would imply the "broadband" help for the poor would be offset by a reduction in other help for the poor. But the whole section is very vague, and this needs to be checked. that's why I put "apparently" in this headline. If the D.C. reporters do their job Tuesday, I'll be able to update this with more facts.

Editor, DSL Prime and Fast Net News
Author with Jennie Bourne  DSL (Wiley, 2002) and Web Video: Making It Great, Getting It Noticed (Peachpit, 2008) 

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