The Obama Administration's First Dive Into Communications Policy Will Be Felt For Years To Come

Tuesday, September 1, 2009 - 01:00

Many remember the innovative ways in which technology and the Internet were used in the 2008 campaign. Now, the Obama administration has placed a central importance on improving the nation's infrastructure and communications capabilities. Recently President Obama highlighted his administration's goal on developing the nation's communications infrastructure: "[F]rom nuclear proliferation to terrorism, from climate change to pandemic disease none of these 21st century challenges can be fully met, without America's digital infrastructure - the backbone that underpins a prosperous economy and a strong military and an open and efficient government."

The American Recovery And Reinvestment Act Of 2009

The first major step taken in the Obama administration in the field of communications policy was including expanded access to broadband services in the American Recovery and Reinvestment Act of 2009 (Recovery Act). This step will affect communications industry-wide, and will have significant impact on both traditional telecommunication carriers and on any business that relies on broadband access to develop, produce, and market their products.

The Recovery Act, passed shortly after President Obama's inauguration, is an expansive economic stimulus package whose stated goals are to strengthen the economy now and to invest in the country's future. The Recovery Act does this by implementing many of the stated policy objectives of the Obama administration over numerous principal sectors of the economy. In the area of communications, the Obama administration has placed a central importance on broadband access, indicating that "modern technology is critical to the expansion of business, education, and health care opportunities in rural areas and the competitiveness of the nation's small towns and rural communities." The Recovery Act implements this policy initiative by providing funding to expand the broadband infrastructure to underserved areas and directing the Federal Communications Commission (FCC) to develop a National Broadband Plan.

Funding To Expand Broadband Access

Funding in the Recovery Act targets underserved areas for increased communications capacity. The Recovery Act provides $7.2 billion to be spent on deploying infrastructure for broadband access nationwide. Disbursement of the initial portion of these funds, a total of $4 billion, began on July 1, 2009, when the Commerce Department and the Agriculture Department issued a joint Notice of Funding Availability, detailing rules and criteria for fund distribution. Included in this initial disbursement are $2.4 billion in grants and loans (with $1.2 billion for projects primarily focused on facilities to end-users and $800 million for other projects, such as backhaul or interoffice transport projects), $1.2 billion for broadband infrastructure projects, $50 million for public computer centers, and $150 million for other broadband projects. The recipients of this funding will be announced around November 7, 2009, and funds will be released in early 2010. The Recovery Act provides for two additional disbursements in 2010, with the total $7.2 billion to be disbursed by September 30, 2010. The Recovery Act mandates that all projects funded by the Act be fully completed within three years.

The impact of a $7.2 billion infusion on the communications industry cannot be understated. Communications carriers can provide increased bandwidth to end users increasing Internet speeds and improving business efficiency. Moreover, much of these funds are specifically designated for infrastructure improvements to small towns and rural areas, traditionally viewed by communication carriers as less profitable. For example, one carrier, Level 3 Communications, announced in August that it is seeking stimulus funds to deploy fiber in currently unserved or underserved regions, that will help cable operators, telephone companies, wireless providers and local governments provide broadband services. The availability of these funds, to Level 3 or any other provider, will improve Internet access in these areas, vastly improving business efficiency and allowing these areas to compete on a more even playing field with businesses in larger, more developed metropolitan areas.

National Broadband Plan And New Policy Initiatives

In addition, the Recovery Act calls for the FCC to develop a comprehensive National Broadband Plan by February 2010 which "shall seek to ensure that all people of the United States have access to broadband capability and shall establish benchmarks for meeting that goal." The FCC is required to report to Congress its findings by February 3, 2010, and submit the Plan to Congress by February 16, 2010.

In its first workshop, FCC Chairman Julius Genachowski highlighted the importance of developing a National Broadband Plan. Chairman Genachowski noted that nearly 40 percent of American households do not have broadband access - a figure that rises dramatically for minorities and households earning less than $50,000 per year or in rural areas. Chairman Genachowski also gave concrete examples of the potential benefits for wider broadband access at the first workshop, noting that recent programs provided Internet access to public housing projects, allowing residents to use the Internet to improve their jobs and find jobs, and that expanded access to broadband has also helped further telemedicine diagnoses, allowing specialty doctors to diagnose remotely in underserved areas. These examples are only just a sampling of the benefits expanded broadband access will provide.

The FCC took its first step to develop the National Broadband Plan on April 8, 2009, when it adopted a notice requesting comments on how to structure the plan. The FCC envisions nearly two dozen workshops to solicit comments from various groups, including consumers and private industry. In addition, the notice to develop the National Broadband Plan included topics that the FCC identified as relevant to the Plan. This extensive list of issues includes such wide-ranging topics as defining broadband access, determining whether a mechanism should be in place to ensure affordable broadband access (similar to the role universal service funding plays in promoting the availability of traditional wireline services), discussing wireless service policies, and determining whether "nondiscrimination" should be added to the FCC's existing Internet Policy Principles. While business will be affected by a change in nearly all of the policies under consideration, open networks, or hierarchical access, and wireless deployment will have the most significant impact on both communications carriers and non-communications carriers alike.

The debate over open Internet access, or nondiscriminatory access, has heated up in recent years. On May 29, 2009, President Obama weighed in, stating "I remain firmly committed to net neutrality so we can keep the Internet as it should be - open and free." "Net neutrality" refers to the policy of preventing the practice of some Internet service providers of creating a hierarchy in the transmission of the information over the broadband connection, depending on several factors. This hierarchy, instituted by some broadband providers, reserves bandwidth for the service provider and favored vendors and limits bandwidth for competitors or other disfavored vendors. Limiting bandwidth reduces or stalls the speed of the transmission, making a competitor's website content slower, and therefore less desireable to the consumer. Net neutrality or so-called open networks would require all service providers to treat content the same regardless of the service provider.

Currently, a hierarchy of service levels is per se not prohibited by the FCC. However, by including open access in the National Broadband Plan, the FCC may be ready to add open access to its other four guideposts for Internet policy. Currently, the four principles that guide FCC decision-making on Internet policies are provided in its September 23, 2005, Policy Statement (FCC 05-151). These are: to encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet; entitle consumers to access the lawful Internet content of their choice; entitle consumers to run applications and use services of their choice, subject to law enforcement; and, entitle consumers to competition among application providers, service providers and content providers. Each of these policies has a direct impact on businesses and consumers, yet hierarchical access does not violate any of these stated policies.

The debate on hierarchical access centers on profitability. The service providers argue that they developed the network and should have priority on their network for their content, and should be able to manage and maintain their network according to their standards. Others argue that providing slower connection speeds to competitors' and other disfavored companies' websites undermines the "spirit" of the Internet, and competition. With the new administration, speculation is that the FCC now appears to be ready to place at least some restrictions on hierarchical access. Until the FCC places restrictions on hierarchical access, your choice of an Internet service provider may be influenced by the content you intend to use on the Internet. And, if you choose a service provider that filters the content hierarchically, you may be faced with slow or stalled downloading or response time for certain Internet sites.

In addition, the National Broadband Plan's goals include promotion of wireless broadband services. As many will remember, the FCC recently oversaw the transition of the television signals formats across the U.S. by requiring that full-time analog television broadcasters switch to digital transmissions (DTV). This opened up new bandwidth for wireless service providers and others seeking spectrum in the marketplace, such as wireless broadband. Before the DTV conversion, wireless carriers and other companies were faced with capacity restrictions as spectrum dwindled due to increasing mobile carrier use. Increased bandwidth availability allows communications companies to expand their traffic capacity, lessening congestion on the current networks. Increased bandwidth availability also permits new entrants into the marketplace, increasing competition and promoting innovation.

The Obama administration's focus on broadband access in the Recovery Act and the mandate to develop a National Broadband Plan builds on the success of the current, highly developed infrastructure in the U.S. The substantial funding for broadband access in the Recovery Act provides communications carriers impetus to expand capacity and reach out to underserved areas. And, the National Broadband Plan seeks to harmonize divergent policies in broadband, making more efficient use of the current network infrastructure and laying the foundations for future growth and innovation which will be felt for years to come.

Henry T. Kelly is the Managing Partner in the Chicago office of Kelley Drye & Warren, where his practice focuses on telecommunications-related litigation matters. Michael R. Dover is an Associate in the firm's Chicago office, where his practice focuses on telecommunications and commercial litigation.

Please email the authors at hkelly@kelleydrye.com or mdover@kelleydrye.com with questions about this article.