FCC Blocks Elon Musk From Getting Millions In Subsidies For Delivering Broadband To Traffic Medians

from the actually-paying-attention dept

Late last year consumer group Free Press released a report showing how numerous broadband providers had been gaming the FCC's RDOF (Rural Digital Opportunity Fund) subsidy program to get money they didn't really deserve. The program doles out roughly $9.2 billion in subsidies paid for by money paid by consumers into the Universal Service Fund (USF). The study clearly showed that during the last RDOF auction a long list of ISPs gamed the system to gain millions in subsidies to deliver broadband to areas that didn't make any coherent sense.

This ISP, for example, nabbed millions of dollars to deploy service to places that already had it -- like five feet outside of Apple's $5 billion new campus. Elon Musk's Starlink also managed to nab $886 million in subsidies to deploy broadband service to places like airport parking lots and traffic medians.

The whole mess was just completely ignored by previous FCC Boss Ajit "what broadband competition problem" Pai. After months of withering criticism from numerous fronts, the FCC under interim boss Jessica Rosenworcel has stepped up and fired off letters to several of the worst offenders, giving them a second chance to apply for funding with proposals that actually serve the public interest:

"The Federal Communications Commission told SpaceX and other companies on Monday that the billions in rural broadband subsidies it doled out last year can’t be used in already connected areas like “parking lots and well-served urban areas,” citing complaints. The commission, in an effort to “clean up” its subsidy auction program, offered the companies a chance to rescind their funding requests from areas that already have service."

Granted the problems with the RDOF subsidy process is just one small part of a much bigger problem. For years the government has doled out billions of dollars to telecom giants for fiber networks they then routinely half deploy. Inaccurate maps and availability data then mar the process further, obscuring not only the lack of access (up to 42 million Americans still can't access broadband) but the way a lack of overall competition harms consumers and raises rates (83 million Americans live under a broadband monopoly).

Thanks to the immense political influence giant telecom providers have over Congress and regulators, efforts to improve the entire mess comes glacially, when they come at all. That's not to ignore the huge benefit subsidies can have on less affluent and disconnected areas of the country when applied correctly, but, for decades now, regional monopolies have dictated US telecom policy. And the result has generally what you'd expect: namely billions in pointless tax breaks and subsidies thrown at companies like AT&T in exchange for layoffs, pipe dreams, and perpetually half completed networks.

Filed Under: ajit pai, broadband, competition, elon musk, fcc, jessica rosenworcel, rdof, rural digital opportunity fund, starlink, subsidies, usf
Companies: spacex, starlink

FCC Gives ISP $8,000 To Deliver Broadband Five Feet From Apple's $5 Billion Campus

from the wasted dept

We've noted repeatedly that there are two major reasons US broadband is slow, spotty, and expensive: regional monopolization (a lack of competition), and the state and federal regulatory capture (corruption) that protects it. On the latter front, there's been an absolute army of telecom industry aligned folks, who, for decades, have relied on dodgy broadband availability maps and dubious data to not only pretend there's no real problem that needs fixing, but also to slather companies with subsidies without ensuring that money actually goes toward fixing the problem.

Last fall, the FCC held a reverse auction doling out nearly $9 billion from the FCC's Rural Digital Opportunity Fund (RDOF), paid into via Universal Service Fund (USF) contributions affixed to your broadband and phone bills. To be very clear: some of this money will absolutely help shore up access in underserved communities. But after digging into the FCC maps of the winning bidders, consumer groups found a long list of examples where we were throwing billions of dollars at companies for deployments that make no sense.

For example, Free Press noted that Elon Musk, the second wealthiest man on the planet, managed to game the FCC system and nab $886 million in ratepayer subsidies for his Starlink system. And he did it by promising the FCC that his company would bring broadband to essential US areas like... already connected airports and highway traffic medians:

"As we have documented in our previous two posts, however, this effort to close the rural-broadband digital divide looks more and more like one of the most wasteful projects in FCC history."

While some of this grift will be cleaned up in a second round of FCC application review, you can't blame this on "we didn't know," or "the system just needs tweaking." We've thrown countless billions of dollars at telecom incumbents for fiber networks routinely only half completed. It's a policy choice. Now we're giving billionaires who don't need the money, even more money to deliver service that's inferior to the fiber networks most of you already paid for.

The problem is pervasive. Light Reading, for example, noticed this week that a small wireless ISP by the name of LTD Broadband is poised to get $8,000 from the FCC to deploy 1 Gbps service five feet outside of Apple's $5 billion new headquarters:

"RDOF funds will go to serve areas adjacent to the brand-new Apple Campus in Cupertino," complained the Competitive Carriers Association (CCA) to the FCC in a recent filing. "Far from 'unserved,' the Apple Campus is one of the most connected places in the entire world."

LTD nabbed $1.3 billion in promised federal payments to build broadband across 13 states. But the company is one of several that's getting FCC funds that don't make sense, for service it's not clear they can even successfully deploy:

"LTD is one of several major RDOF winners that has faced withering criticism that it will not be able to meet its RDOF obligations. "There is no indication that LTD [Broadband] has the technical, engineering, financial, operational, management, staff or other resources to meet RDOF build-out and service obligations," wrote the Minnesota Telecom Alliance and the Iowa Communications Alliance in a recent joint filing to the FCC."

And while there have been spotty efforts to improve both mapping and subsidization, they always seem just around the next corner or a few years down the road. So when you see guys like the FCC's Brendan Carr whine about how "big tech" needs to give billions of dollars to "big telecom" for no coherent reason, notice how he excludes the fact that fixing the money trough that is US telecom subsidization should probably be tackled first. As Ajit Pai showed, pretending you care about the "digital divide," while simultaneously making the corruption and monopolization that created it worse, remains very fashionable.

Again, many subsidies have certainly gone to very promising projects that provide direct and immediate aid to underserved areas neglected by regional giants. But at the same time, federal and state US taxpayers have likely paid enough in subsidies over the last few decades to deliver fiber to every home in America several times over (not that we'd ever bother to do a comprehensive audit). Instead of getting that fiber, Americans get a very expensive hamster wheel that's about 40% incompetence and grift.

Filed Under: broadband, corruption, covid, digital divide, fcc, oversight, rdof, rural digital opportunity fund, subsidies, universal service fund, usf

Consumer Groups Say The FCC Just Blew $9 Billion To Deliver Broadband To Already Served Rich People

from the fluff-and-nonsense dept

The FCC last week held a reverse auction to dole out $9 billion to, purportedly, improve patchy U.S. broadband. But consumer groups say the auction did nothing of the sort, instead delivering $9 billion to a dodgy roster of companies with existing histories of fraud that will be using much of the funds to expand broadband to affluent areas where broadband is often already available.

The reverse auction involved doling out billions from the FCC's Rural Digital Opportunity Fund (RDOF), paid into via Universal Service Fund (USF) contributions affixed to your broadband and phone bills. To be very clear: some of this money will absolutely help shore up access in underserved communities. But after digging into the FCC maps of the winning bidders, consumer groups like Free Press say something ugly is afoot. The group found a long list of examples where companies got millions of dollars to dole out broadband to a handful of wealthy homes in affluent areas, many of which already have service:

There are plenty of examples of this in the data. Like this affluent section of LA:

Or here at LAX, where a company is getting ratepayer money to deploy broadband to a whopping two already-served locations near the airport:

Ajit Pai and friends are, you'll recall, the same folks who like to hyperventilate over community broadband as an inevitable taxpayer boondoggle (it isn't, but that doesn't stop them). There's an absolute ocean of telecom-linked consultants, lobbyists, policy wonks, academics, and think tankers who'll be happy to go on at great lengths about how localized community broadband networks are some kind of socialistic hellscape of taxpayer fraud. But bring up how we throw way, way more money at AT&T in exchange for reduced investments, empty promises, and layoffs and...crickets.

Enter this new auction data, which indicates your money is being thrown at ISPs that already have long histories of dodgy behavior and being misleading about how subsidies are spent. That includes Frontier Communications, which has faced repeated accusations of subsidy fraud in places like West Virginia. And Charter Communications (Spectrum), which almost got kicked out of New York State recently for repeatedly lying to regulators about broadband deployment efforts. These are companies with pretty long histories of extremely dodgy behavior, being given millions to do something they've already failed to do, repeatedly.

Of course there are some new players getting money for dubious reasons too. Like Starlink, which is owned by one of the wealthiest men in the history of the planet, getting a billion dollars so it can deploy broadband to, according to the FCC's own logic and data, parking lots near the Pentagon:

Why does one of the wealthiest men in America need ratepayer subsidization to deploy broadband to areas his project was already targeted to serve? Good question! The company wouldn't respond to reporter inquiries asking why the money was needed or what it plans to do with it, which is always a good sign.

There's a good early breakdown of the results and how this auction was supposed to work by Christopher Mitchell at the Institute for Local Self Reliance. Telecom consultant Doug Dawson also does a good job breaking down what went wrong, noting that because the FCC let fixed wireless providers pretend fixed wireless is the equivalent of fiber (it's most certainly not), a lot of genuine fiber expansion efforts got the short end of the stick:

"By allowing WISPS to claim gigabit capabilities, the FCC cheated huge numbers of people out of getting fiber. There were numerous electric cooperatives, small telcos, CLECs, fiber overbuilders, and public/private partnerships in the auction hoping to bring fiber to entire rural counties. In looking at the footprints won due to this fiction, I’m guessing the FCC’s decision to allow fixed wireless to falsely bid as gigabit technology killed fiber construction to at least a few hundred rural counties."

I don’t understand why the FCC couldn’t get this right. The FCC could have talked to any one of a hundred telecom engineers I know who would have laughed at the idea that fixed wireless can deliver gigabit speeds across big tracts of extremely rural America. A huge portion of this auction was based upon this lie, and that never bodes well for the long run.

There's this thing deregulatory telecom zealots do where they overhype emerging telecom tech, pretending it's some kind of deus ex machina that will magically fix everything. This lets them pretend that magic new tech will bring competition to market, thereby justifying mindless deregulation and napping regulators. Ex-FCC boss turned top cable lobbyist Mike Powell did this with broadband over powerline (BPL), which wound up being an interference-prone dud. You're seeing it happen again with 5G, despite U.S. 5G being too patchy, underwhelming, and expensive to fix America's affordable broadband problem.

This is all pretty well in line for an Ajit Pai FCC that talks endlessly about its "dedication for the digital divide," but has such little respect for accurate data it can't actually tell you where broadband is or isn't available (but pretends to). And because folks like Pai are so ideologically rigid, they can't even acknowledge that the biggest problem in U.S. broadband is monopolistic domination by a handful of giants resulting in massive swaths of the country where competition is virtually nonexistent. As such it's not surprising the end policies are often fluff and nonsense untethered from the reality on the ground.

A serious, functioning FCC would make accurate data the priority. It would then focus on the best, smartest, and most creative ways to drive new technology and competition to those markets, whether you ideologically agree with the solution or not. Instead, we have an FCC that literally pretends America's broadband competition problems don't exist, misidentifies the real problem out of ideological and partisan hubris, then applies solutions that largely involve throwing billions at companies with a twenty year track record of taking subsidies in exchange for empty promises.

Filed Under: broadband, digital divide, fcc, rdof, reverse auction, rural digital opportunity fund, usf

The FCC Has To Remind ISPs Not To Spend Taxpayer Subsidies On Booze, Trips To Disney World

from the like-my-subsidized-Rolex? dept

For many years now, the General Accounting Office has warned the FCC that if it's going to throw billions of dollars at giant ISPs, it might just want to track how that money is spent. GAO reports like this one from 2009 (pdf) noted that not only has the FCC historically done a dismal job at tracking subsidy spending, most government broadband policies have been based on flawed, incomplete or downright hallucinated data (just check out our $300 million US broadband map). In other words, for the better part of fifteen years our government not only didn't really know where broadband funding was needed, it couldn't be bothered to track if it was actually going there.

Not too surprisingly, as a result, we've seen years of fraud, waste and abuse in the FCC's Universal Service Fund (USF) and e-rate programs intended for rural and school telecom improvements. To be clear, the USF has certainly helped thousands of communities; but were someone to conduct an audit of state and federal broadband subsidies since the late nineties (which will never happen) they'd very likely find that misdirected funds could have delivered a fiber connection to every U.S. home and school -- several times over.

As the FCC looks to expand the USF to cover additional rural broadband deployment, it's now warning ISPs that somebody's at least pretending to watch where billions of dollars are going. An FCC notice to recipients of FCC funds (pdf) this month informs companies that subsidies intended for broadband...should actually be used for broadband:

"The Commission reminds all eligible telecommunications carriers (ETCs) that receive support from the Universal Service Fund’s high-cost mechanisms of their obligations to use such support only for its intended purposes of maintaining and extending communications service to rural, high-cost areas of the nation."

The FCC proceeds to remind ISPs that this money should not be used for booze, gifts for co-workers, entertainment, political donations or cafeteria art work. Amusingly, the FCC includes a few examples of ISPs that have decided to use the USF as their own personal little slush fund. One ISP, by the name of Sandwich Isles Communications, collected $242,489,940 from the USF over a decade, purportedly to provide telecom service to just 3,659 rural customers. Instead, company owner Albert Hee used taxpayer money for everything from massages to trips to Disney World:

"For example, the companies apparently paid $96,000 so that Hee could receive two-hour massages twice a week; $119,909 for personal expenses, including family trips to Disney World, Tahiti, France, and Switzerland and a four-day family vacation at the Mauna Lani resort; $736,900 for college tuition and housing expenses for Hee’s three children; $1,300,000 for a home in Santa Clara, California for his children’s use as college housing; and $1,676,685 in wages and fringe benefits for his wife and three children."

Note the FCC never bothered to notice. Lee was ultimately convicted in Hawaii of filing bogus tax returns, and the FCC stopped throwing money at the company only just a few months ago. So while it's great the FCC seems to finally be paying closer attention to broadband subsidy fraud (it launched a new strike force last year tasked with rooting out abuse), most of the companies abusing the USF over the last twenty years have had notably more clever accountants, lawyers and lobbyists than Lee (read: AT&T and Verizon). Given these more formidable adversaries you'd be hard pressed in finding anybody interested in conducting an audit to see where those billions of dollars actually went. Still, moving forward, it's a good reminder for everybody that taxpayer subsidies should not be used for Jagermeister shots and happy endings.

Filed Under: accountability, broadband, fcc, isps, spending, universal service fund, usf

FCC Commissioners All Claim 'The Other Guy' Came Up With This Crazy Broadband Tax Idea

from the the-Man-inadvertently-sticks-it-to-himself-this-time dept

Most of the time, it seems our "representatives" in Washington simply don't care what their constituents want. The DC thought process is that constituents are not to be trusted, much less listened to. Of course, all bets are off during election cycles. Suddenly, everyone cares.

Karl Bode at DSLReports has been following the FCC's "National Broadband Plan" since the first draft was made public back in March. He noted then that an additional $1-5 was to be added to existing customers' monthly bills in order to help fund the USF (Universal Service Fund) and expand broadband coverage.

Now, after asking for public comment and realizing that election season is in full swing, the FCC, along with pretty much everyone in both parties is pointing fingers at each other for daring to hit the poor consumer with yet another tax, all while insisting that they weren't the ones who proposed it. It seems this "proposal" magically appeared without anyone's support, if you believe the sudden backtracking from, well, everyone.

Neil Grace, a spokesman for Chairman Julius Genachowski, said the commission only made the proposal “following the urging of Republican Commissioners and members of Congress."

"The Chairman remains unconvinced that including broadband is the right approach,” he said. Robert McDowell, the only Republican on the commission when the proposal was floated earlier this year, flatly rejected that he ever supported the idea. "I have never suggested taxing broadband Internet access," he told The Hill.

The Hill's Technology Blog has a few more details, including this bit of interesting bit of skepticism from McDowell, who is first in line to head the FCC if there's a party shift this November :

McDowell said he is skeptical that the FCC even has the legal authority to tax Internet service.

So, if I'm reading this right, no one on the FCC supports this proposal that the FCC put forth and is now considering, even though no one wants it. Got it.

Of course, this wasn't the only suggestion the FCC considered, but the others weren't much better.

In April, the FCC suggested a number of ideas for reforming the fund's contribution system, including adding a fee to broadband Internet service. The commission also sought comments on taxing text messages, as well as levying a flat fee on each phone line, instead of the current system, which is based on a portion of the revenue from interstate phone calls.

Between now and November, this plan will have no support from previously interested politicians. An FCC official has referred to the idea as "politically toxic." Once the elections are over, though, it will probably be placed right back on the table.

The "internet tax" does have some support, though.

A number of companies, including AT&T, Sprint and Google, expressed support for a broadband tax in comments filed with the FCC.

Now, there's a good reason for these companies to support the funding of the UCF through these fees. For starters, this gets passed along to the customers so it's no money out of their pocket. (And it appears on the bill as a below-the-line charge, in order to allow both the government and the phone company to avoid calling it a "tax.") Even better, the UCF has become a loosely-regulated "slush fund" which dumps collected "fees" directly back into the pockets of the same companies collecting it in the first place.

What started as a program with important goals (making sure rural farmers can make phone calls and ensuring the poorest among us can dial 911) turned into an unaccountable corporate slush fund. Today USF is an $8 billion annual program, nearly quadrupling in size since its inception, with the bulk of that increase going to landline and wireless phone companies.

Maybe this massive growth would be no concern if USF were a model program with a sterling reputation for efficiency. But it’s not. One recent study found that 59 cents of every USF dollar raised for rural networks was spent on administrative expenses and general overhead. A 2010 audit of the rural USF program found that one out of every four dollars sent to participating phone companies was an “overpayment,” with nearly a billion dollars unaccounted for.

The corporate supporters of this plan to "expand the USF contributions base" have no constituency to worry about and have boldly stated that they'd love to have additional fees levied, presumably for noble reasons, like providing 911 service for rural farmers or helping lower income individuals acquire broadband services.

AT&T says that “retail mass market broadband Internet access should be included” in the FCC’s tax, and Google “strongly supports expanding the USF contribution base to include broadband Internet access services,” even as it begs the FCC to exempt Google’s own voice telephony services from the USF tax.

Conveniently ignoring the fact that adding additional fees does nothing to encourage broadband adoption by the low income population, the companies who stand to benefit the most from having more money dumped into a big cash pool are also first in line to make generous offers with other peoples' cash. The government is always more than happy to "pick up the check" on grandiose gestures, but at least every two-to-four years they remember whose wallet they're actually using. But these companies, with a hand stuck in both your back pocket AND the till don't have a periodic attack of conscience. This "broadband tax" will return to the table again and again as long as lobbyists still roam D.C.

Filed Under: broadband, broadband tax, fcc, universal service fund, usf

'Consumer' Group Wants Netflix To Tax Customers To Give To Telcos?

from the really? dept

This one's a bit bizarre. We were just talking about the ridiculous boondoggle called the Universal Service Fund, which is one of those "taxes" on your phone bill that's supposed to go towards having the big telcos supply service to rural areas. Of course, since there's no oversight, it seems like most of the money just goes into the telcos coffers. There are all sorts of ways to deal with this, but one idea that makes no sense at all has been put forth by the Consumer Federation of America... who thinks that Netflix should be "taxed" to provide money for the USF. Why? Um, that's not clear. Basically CFA seems to think that big internet companies should now pay up just because:

"The Internet is not an infant industry anymore. It can certainly bear the burden of making sure that wires and the communications mediums are there."

So, really, what this "consumer" group is suggesting is that Netflix raise its prices on consumers, to give telcos more money that they just use to pay for operations, rather than actually investing in infrastructure for the disconnected. How does that possibly help "consumers"?

Filed Under: broadband, consumers, tax, usf
Companies: consumer federation of america, netflix

Qwest, CenturyLink Merge, Create Even Bigger Marginally-Relevant USF Money Pit

from the bigger-does-not-mean-better dept

Qwest was founded in 1996 by Philip Anschutz, who at the time owned the Southern Pacific Railroad and used the opportunity to deploy fiber lines along railroad tracks. It seems like only yesterday that Qwest paid $45 billion to acquire US West in 2000, one of seven baby bells created by the antitrust breakup of AT&T in 1983. Since then, Qwest has stumbled through accounting scandals and watched its stock plummet as the carrier struggled with traditional voice defections without a wireless division to buoy revenues. Meanwhile, it almost was yesterday that CenturyTel merged with Embarq to create "CenturyLink." This morning Qwest and CenturyLink announced they in turn would be merging in a deal worth $22.4 billion (including $11.8 billion in Qwest debt).

At first glimpse it's not entirely clear what the point of the merger is, unless the two companies were simply interested in losing landline and last-generation DSL customers to cable competitors even faster. Neither company has exactly been lighting it up on the network upgrade front -- and Qwest has spent most of the last few years trying to trim debt for an acquisition instead of investing back into the network. The result is a company with aging last-mile infrastructure who (in the markets where it actually sees competition) pits slower DSL against faster alternatives like cable DOCSIS 3.0 technology or community fiber (which they have spent millions suing and fighting in Utah and Washington State).

Creating a larger company doesn't magically spawn a wireless division, and the company is still going to need substantially more cash to upgrade all of that outdated copper if they want to stay relevant. They may be thinking that by merging they can create a "too big to fail" super-rural telco with a better shot of getting USF and stimulus funds. As we've long noted, the USF is a very, very broken program that funnels money to carriers with historically little to no oversight into how that money is spent (and $25 billion has been dumped into e-Rate alone since 1998). Qwest recently applied for $350 million in federal stimulus funds, and lobbyists have been pushing the FCC to expand the USF to cover residential broadband and give more of that money to bigger carriers.

So the result will be a new, massive phone company primarily serving uncompetitive, rural markets using outdated last mile connections, with consumers helped through this transition via a support infrastructure that just grew incredibly fast. All of this will be propped up by the historically-broken (but soon to be supposedly "reformed") USF system and taxpayer subsidy, guided by Qwest lobbyists and an FCC with no real interest in improving competition in the sector. Surely this will turn out well for everybody involved, right?

Filed Under: usf
Companies: embarq, qwest