public knowledge berkman comments in fcc gn 09 47 filed 11-16-2009

8/14/2019 Public Knowledge Berkman Comments in FCC GN 09 47 Filed 11-16-2009

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Before the

FEDERAL COMMUNICATIONS COMMISSION

Washington, D.C. 20554

In the Matter of ))

Broadband Study Conducted by the Berkman )Center for Internet and Society )

)International Comparison and Consumer Survey )Requirements in the Broadband Data Improvement )Act ) GN Docket No. 09-47

) National Broadband Plan Notice of Inquiry ) GN Docket No. 09-51

)Inquiry Concerning the Deployment of Advanced )Telecommunications Capability to All Americans )In a Reasonable and Timely Fashion and Possible )Steps to Accelerate Such Deployment Pursuant to )Section 706 of the Telecommunications Act ) GN Docket No. 09-137

COMMENTS OF PUBLIC KNOWLEDGE, CCTV CENTER FOR MEDIA AND

DEMOCRACY, MEDIA ACCESS PROJECT, MEDIA ALLIANCE, AND U.S. PIRG

ON NBP NOTICE # 13

Harold FeldRashmi RangnathMichael Weinberg, Law ClerkPublic Knowledge1875 Connecticut Ave. NWSuite 650Washington, DC 20009(202) 518-0020

November 16, 2009


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Table of Contents

I. UNBUNDLING, FUNCTIONAL SEPARATION, AND STRUCTURALSEPARATION INCREASE ADOPTION AND COMPETITION IN BROADBAND

SERVICES..................................................................................................................................... 3II. THE COMMISSION SHOULD STRIVE TO SUCCESSFULLY IMPLEMENT APOLICY OF UNBUNDLING. ..................................................................................................... 5

A. The Commission Should Enforce Unbundling Requirements Across Platforms..................... 5B. The Commission Must Be Prepared to Enforce Its Rules For the Long Term. ....................... 7

III. PREVIOUS OBJECTIONS TO UNBUNDLING HAVE PROVEN TO BEGROUNDED ON INACCURATE ASSUMPTIONS. ............................................................... 8

A. The Assumption That Regulation Discouraged Investment To Facilities Based CompetitionIs Not Supported By Evidence And Is Contradicted By The Berkman Study. ................................ 8

1. The Berkman Study Finds a Positive Link Between Unbundling and Competition. ................... 8IV. WHILE IMPORTANT, UNBUNDLING DOES NOT RESOLVE ALL CONCERNS.

11A. Consumers Face Significant Hurdles When Switching Platforms........................................... 11

1. Switching Between Providers Involves Significant Costs to Consumers................................... 12B. Despite Unbundling Requirements, Other Consumer Protections Will Still Be Necessary.. 13

V. GOVERNMENT EFFORTS TO ENHANCE COMPETITION SHOULD BEENCOURAGED IN CONJUNCTION WITH UNBUNDLING............................................. 14

A. Investment in Broadband Service by State and Local Authorities Can Provide ................... 14A. Much Needed Competition at the Wholesale and Retail Level................................................ 15B. Federal Funding Can Also Induce Competition........................................................................ 17

VI. FCC HAS THE AUTHORITY TO REQUIRE UNBUNDLING ACROSSPLATFORMS. ............................................................................................................................ 18

A. The FCC Should Reclassify All Broadband Services as Title II Services. .............................. 18B. The Commission Can Impose Unbundling Requirements Without Reclassifying AllBroadband Services as Title II Services. ............................................................................................ 20

1. The Commissions Ancillary Authority Grants it the Power to Impose Unbundling................. 202. Section 706 of the Communications Act of 1996 Specifically Empowers the Commission toEncourage the Deployment of Broadband Services........................................................................... 213. The Commission Can Require the Unbundling of the Telecommunications Component ofBroadband Services............................................................................................................................ 224. The Commission Can Make Unbundling a Prerequisite for the Inclusion of Voice Packages in aTriple Play Offering. .......................................................................................................................... 23


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Summary

Broadband competition leads to economic growth, more jobs, and lower prices for

consumers. As the Berkman Study makes clear, unbundling increases broadband penetration,

bringing more broadband to more people and businesses. As a result, countries with policies that

encourage structural separation experience a growth in Gross Domestic Product (GDP). This

growth comes from the increased productivity and opportunity that broadband provides. The

Commission should recognize the benefits that structural separation has brought to the countries

examined in the Study, and move to create similar beneficial policies here in the United States.

These policies should be as platform neutral as possible. There is no reason to apply

unbundling rules to some platforms while excluding others. As the Berkman Study makes clear,

unbundling benefits consumers. Consumers deserve this benefit on all platforms.

Once the Commission has developed its new unbundling rules it must commit to

enforcing them. Unbundling rules without dedicated enforcement will guarantee both the failure

of the unbundling policy and the continued decline of Americas international broadband

standing.

Opponents who argue that broadband investment is fueled by the current deregulatory

climate are undermined by the findings in the Berkman Study. Instead, just the opposite appears

to be true: when governments implement a clear policy of unbundling it drives investment,

access to broadband services, and ultimately GDP and job growth.

Unbundling is certainly not a silver bullet. The Commission will still need to vigilantly

protect consumers in an unbundled environment. However, it will be a significant step towards

solving a number of problems in the broadband industry.

In addition to unbundling, the Commission should encourage government efforts at every

level to provide competition and solve market failures. Direct government investment can create


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critical infrastructure that can then be shared by private retail broadband providers. Government

commitments to un- and underserved areas can draw attention to markets that private industry

may have missed. Finally, government investment can help bring access to consumers who

might never receive affordable broadband access without it.

There are a number of ways in which the Commission is empowered to implement

unbundling. First and foremost, the Commission can act to reclassify all broadband services

no matter the platform as Title II services. This would help bring a unified framework to all

types of broadband services.

However, the Commission need not classify all broadband services as Title II services in

order to impose unbundling. The Commissions Title I ancillary authority empowers it to

impose the types of rules discussed in the Berkman Study. Additionally, Section 706 of the

Communications Act contains a directive from Congress to create a regime to encourage the

deployment of broadband services. The Berkman Study suggests that unbundling is just such a

regime.

Ultimately, the Berkman Study makes it clear that unbundling will provide the

environment necessary for increased broadband competition, growth, and access. This will

power critical economic expansion and create jobs. Once the FCC, using either Title I or Title II

authority, creates an unbundling regime, both consumers and businesses will benefit.


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Argument

I. UNBUNDLING, FUNCTIONAL SEPARATION, AND STRUCTURALSEPARATION INCREASE ADOPTION AND COMPETITION IN BROADBAND

SERVICES.

The broadband study conducted by the Berkman Center for Internet and Society1

(Berkman Study or Study) provides useful insight into regulatory policies that have affected

broadband penetration in many OECD countries. Based on these insights the Study concludes

that unbundling has a positive and significant effect on levels of penetration.2

In addition to

unbundling, the Study also finds that open access policies such as bitstream access, collocation

requirements, wholesaling, and functional separation facilitate competition in broadband

markets.

The Studys findings do not stand alone. Beginning with the firstNotice of Inquiry,

Public Knowledge and others cited to the experience of European and Asian countries that have

adopted unbundling and other pro-competitive regulations such as structural and functional

separation.3

Nor is the Berkman Study the only study to conclude that unbundling encourages

adoption without discouraging investment. The attached presentation by Professor Rob Frieden

to the Japanese Ministry of Internal Affairs and Communications found that, in Japan, fiber

unbundling did not negatively impact NTTs investment in fiber.4

In view of these consistent findings, the Commission should recommend readopting open

1 Center for Internet & Society, Harvard University,Next Generation Connectivity: A Review ofBroadband Internet Transitions and Policy from Around the World(Oct. 2009).2Berkman Study at 115.

3See Reply Comments of Public Knowledge,In the Matter of A National Broadband Plan forOur Future, GN Docket No. 09-51 (July 21, 2009). See also Comments of Free Press,In theMatter of A National Broadband Plan for Our Future, GN Docket No. 09-51 (June 8, 2009).4 Rob Frieden, ICT Policy In Japan (April 16, 2009) at slide 8.


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access policies such as unbundling and structural or functional separation for broadband services

as part of the National Broadband Plan. Open access policies would increase competition in the

market for broadband services and greatly improve the levels of penetration in this country.

The benefits of increased broadband penetration more than justify re-examination of the

Commissions policy of deregulation and elimination of the regulations adopted so successfully

in other countries. The Berkman Study notes the strong correlation between economic growth

and increase in broadband adoption. It cites a World Bank report that every 10 additional

subscribers per 100 in high-income countries correlates to a GDP growth of 1.21%.5

As the

Study notes, the average growth rate in these countries between 1980-2006 was 2.1%.

6

Again,

other studies confirm the Studys conclusions. For example, a study of the impact of broadband

in Germany found that increased broadband penetration would contribute 968,00 jobs over a

period of 10 years.7

In other words, broadband penetration creates jobs, and the policies that facilitate

broadband penetration and adoption such as unbundling -- create jobs.8

If this were not

enough, the Berkman Study also provides evidence that broadband penetration advances such

positive benefits as telemedicine, telecommuting, e-commerce, as well as the hard to quantify,

yet extremely valuable, social and political interactions.9

5Berkman Study at 21. The details of the study are available inInformation andCommunications for Development 2009: Extending Reach and Increasing Impact(World Bank2009) at 35-50, available athttp://allafrica.com/sustainable/resources/view/00011823.pdf.6Id.7 Raul Katz, Stephan Vaterlaus, Patrick Zenhausen, Stephen Suter, and Philippe Mahler, TheImpact of Broadband on Jobs and the German Economy, available athttp://www.elinoam.com/raulkatz/German_BB_2009.pdf.8 As discussed in greater detail below, the argument that unbundling will eliminate jobs throughfailure to invest has no empirical evidence and, in light of the evidence that unbundling has noimpact on investment, must be considered highly suspect.9Id. at 23-24.


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Finally, the Berkman Study observes that despite an early lead in broadband adoption, the

United States has consistently lost ground in numerous international rankings.10 Again, Berkman

is not alone in finding that U.S. performance in broadband has declined over time.11

Critics of

individual studies fail to address that multiple studies find a consistent trend: since the United

States abandoned unbundling in favor of a deregulatory approach, broadband deployment and

adoption in the United States has fallen behind countries that adopted unbundling policies in key

metrics such as general adoption, affordability, and utility.

II. THE COMMISSION SHOULD STRIVE TO SUCCESSFULLY IMPLEMENT APOLICY OF UNBUNDLING.

A. The Commission Should Enforce Unbundling Requirements Across Platforms.

Although the details of implementation may differ across platforms, the basic principle of

creating competition via unbundling remains the same. The evidence demonstrates that

requiring unbundling on some platforms and not others injures consumers and creates

opportunities for regulatory arbitrage at the expense of consumer welfare. Especially in the

absence of any pro-consumer benefits to permitting both unrestricted vertical integration,

combined with the ability to exclude competitors from necessary physical facilities, the

Commission should embrace the principle of unbundling in all wireline and wireless platforms.

Oftentimes, consumers access to broadband platforms is limited. To some degree, they

10Id. at 26.11See, e.g., Rob Frieden, Lies, Damn Lies, and Statistics: Developing a Clearer Assesment ofMarket Penetration and Broadband Competition In the United States, 14 Virginia Journal ofLaw & Technology 100 (2009).


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are captured by the platforms actually available in their neighborhoods. If different policies are

applied to different broadband platforms, such stranded consumers will be unable to switch to

more desirable platforms. Even for those consumers with a choice of platform, the potentially

high switching costs between platforms creates lock-in effects that are better addressed by

permitting competition among providers sharing the same platform. Finally, the ability of

providers of competing services to reach all potential customers regardless of platform will have

positive effects on both adoption and consumer welfare.

Commentors recognize that the Study does not come to a conclusion about the result of

unbundling fiber networks. However, as noted in the Study, this is due to the unique technical

topography of fiber optic networks.12 Additionally, the limited number of fiber-based options

available to consumers today provided an inadequate sample size for the Study to confidently

draw conclusions as to how to implement fiber unbundling. It is therefore not a question of

whether the economic rationale for applying unbundling changes when applied to fiber, but

rather how best to apply unbundling rules to fiber. Accordingly, while adopting the underlying

principle of unbundling across all platforms, the Commission will need to initiate a separate

proceeding to determine the proper approach to unbundling fiber.

For similar reasons, the Commission will need to separately study the question of

unbundling in wireless. To some extent, licensees already provide wholesale access to spectrum.

The fact that industry calls this roaming agreements rather than wholesale access to

spectrum does not change the underlying nature of activity. However, the further question of

how to unbundle the wireless platform poses sufficient technical differences from DSL and cable

that the Commission should examine wireless separately.

12Berkman Study at 119-120.


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B. The Commission Must Be Prepared to Enforce Its Rules For the Long Term.

No matter how the Commission ultimately decides to proceed with unbundling, it must

be prepared to enforce its own rules. The history of the unbundling of voice calling vividly

illustrates that incumbents have strong motivations to delay and undermine attempts to bring

more competition to their markets.13

It is critical that the Commission recognize that merely

establishing an unbundling framework will not accomplish any of its goals. Unbundling requires

a robust and ongoing enforcement regime to ensure compliance. In the absence of such ongoing

enforcement incumbents will do as little as possible to comply, slowly undermining the policy

with inaction.

In addition to enforcing its own rules, the Commission must have the courage of its own

convictions. The unbundling of broadband will not be a simple process, and it will not be

accomplished overnight. The most destructive step that the Commission could take would be to

implement a policy of unbundling only to create a cloud of regulatory uncertainty by constantly

reexamining, waiving, and rewriting its rules. The Commission must explicitly recognize that

the transition to unbundling will not always be a smooth process, and that it will not be deterred

by the efforts of incumbents to obstruct the process. As noted in the Study, the delay in

implementation from litigation by incumbents, followed by an abrupt about face by the

Commission in regulatory approach, significantly impacted the development of broadband

domestically.14

13Id. at 82-83.

14Id.


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III. PREVIOUS OBJECTIONS TO UNBUNDLING HAVE PROVEN TO BEGROUNDED ON INACCURATE ASSUMPTIONS.

A. The Assumption That Regulation Discouraged Investment To Facilities BasedCompetition Is Not Supported By Evidence And Is Contradicted By The Berkman Study.

1. The Berkman Study Finds a Positive Link Between Unbundling andCompetition.

The Berkman Study finds that unbundling has not hampered facilities based competition.

To the contrary, the report observes that facilities based competition usually complements access

based competition.15 For example, the report cites the example of the United Kingdom and New

Zealand where functional separation resulted in rapid effects on competitive entry, penetration,

prices, and/or speeds.16 On the other hand, the report finds that in the U.S. and Canada, both of

which have deregulated based on the assumption that it would encourage intermodal

competition, cable and telephone incumbents offer the lowest speeds at the highest prices.17 This

is in contrast to Japan, France, and Sweden where all providers cable, telephone, and

unbundling based entrants offer highest speeds and lowest prices.18

2. Other Studies Support This Conclusion.

The Berkman study is not alone in finding that regulation does not deter investment. A

15Berkman Study at 76.16Id.17

Id. at 80.18Id.


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study conducted by Free Press finds that investment decisions are influenced by a number of

factors, and that regulation in not one of the primary factors.19 Further, the Free Press study

finds that introduction of pro-competitive regulations in the Telecommunications Act of 1996

actually increased levels of investment by telecommunications companies and the dismantling of

these regulations in the years that followed saw a decline in investment.20

3. Opponents Of Unbundling Consistently Fail To Prove The Connection

Between Investment And Deregulation.

Opponents of unbundling regularly claim that the currently unregulated market is the best

way to enable innovation and competition.21

Oftentimes, they point to the billions of dollars per

year that is invested in their networks.22 However, these broad descriptions of capital

expenditure fail to differentiate between previously planned expenditures, necessary upgrades, or

other factors (such as potential competition) that might influence investment decisions.

Post Hoc Ergo Propter Hoc is not evidence. Merely because companies are investing in

infrastructure in an unregulated environment does not mean that they are investing in

infrastructure because they are in an unregulated environment. Broad clams that fail to take into

account non-regulatory pressures to invest do not become proof that deregulation leads to

19S. Derek Turner,Finding the Bottom Line: The Truth About Network Neutrality and

Investment, Free Press (Oct. 2009) available athttp://www.freepress.net/files/Finding_the_Bottom_Line_The_Truth_About_NN_and_Investment_0.pdf.20

Id.21See, e.g. Comments of Comcast Corporation,In the Matter of A National Broadband Plan forOur Future, GN Docket No. 09-51, at 22-3 (2009) available athttp://fjallfoss.fcc.gov/ecfs2/document/view?id=6520219851.22Id. at 33.


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investment merely because they are attached to large figures. Until and unless unbundling

opponents are able to show a correlation between deregulation and investment a correlation

that is undermined by the conclusions of the Berkman Study the Commission should not be

impressed by the billions of dollars invested annually.

B.Investment Since Elimination Of Unbundling Raises Serious Doubts As To Whether

Deregulation Encourages Investment.

As the Berkman Study makes clear, unbundling reduces consumer prices while

increasing available broadband speeds. A policy that implements unbundling will improve

broadband options available to consumers.

To date, the evidence from the United States does not support the conclusion that

deregulation encourages investment in fiber. Of all of the deregulated ILECs, only Verizon has

invested in fiber to the home, in the form of its FiOS service.23 The elimination of loop

unbundling does not appear to have created the type of widespread incentive for other ILECs to

invest in this type of fiber to the home service.

Furthermore, current FiOS buildout patterns suggest that it is competition with cable, not

deregulation, which has driven deployment. Buildout has been focused in affluent, densely

populated urban and suburban markets, home to many of the most profitable customers.24

A

desire to win these customers from cable operators, not deregulation, may be driving Verizons

23See http://www.verizon.com/fios.

24See John Windhausen Jr.,Big Broadband Connectivity in the United States, EDUCAUSEReview, vol. 43, no. 3 (May/June 2008), available athttp://www.educause.edu/EDUCAUSE+Review/EDUCAUSEReviewMagazineVolume43/BigBroadbandConnectivityintheU/162886.


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investment in fiber to the home.

While it focuses on deploying FiOS to densely populated urban areas, Verizon is actively

divesting itself of less dense (and less profitable) rural access lines.25

As deployment slows,26

it

is also possible that some Verizon customers will have to wait years before having access to

FiOS service or never get the service at all.

FiOS illustrates the limits of deregulation as an incentive to increase broadband capacity

and deployment. Although some customers have benefitted from FiOS either directly though

access to fiber to the home, or indirectly as competition forced their Internet provider to reduce

prices other customers have been left behind.

IV. WHILE IMPORTANT, UNBUNDLING DOES NOT RESOLVE ALL CONCERNS.Unbundling policies alone are not sufficient to ensure that the benefits of broadband

reach all consumers. Factors such as high switching costs between broadband providers and

deceptive practices that reduce consumer confidence in these providers must also be addressed.

A. Consumers Face Significant Hurdles When Switching Platforms.

Switching cost is the cost to the consumer in terms of time, money, and inconvenience in

switching providers. These costs result in consumer inertia, slowing the pace of switching

between providers, thereby reducing competition. The Commission should consider the

25See Stacey Higginbotham, Verizon Sells Rural Access Lines to Frontier for $8.6B, Gigaom,May 13, 2009, available athttp://gigaom.com/2009/05/13/verizon-dumps-rural-access-lines-for-8-6b/.26See Karl Bode, Verizons FioS Deployment Enters A New Chapter: Carrier Will Likely PauseDeployment to Market to Existing Footprint, Broadband DSL Reports, Oct. 20, 2009, availableathttp://www.dslreports.com/shownews/Verizon-Blames-Low-FiOS-Additions-On-Crappy-Ads-105237.


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existence of these costs and examine regulatory tools to reduce them as an additional means to

increase competition for broadband services and the benefits of broadband to consumers.27

1. Switching Between Providers Involves Significant Costs toConsumers.

Because broadband services are provided by cable, telephone, and to a lesser extent by

wireless companies, installing a new broadband service often requires consumers to switch from

their existing phone or cable providers. This process involves extremely high switching costs.

Many cable and telecom providers require consumers to pay several fees in order to install the

new service, pushing the price of these new services considerably higher than the advertised rate.

These fees include: charges for renting equipment,28 early termination fees,29 and activation or

installation fees.30

In addition some of these services are only available when bundled with other

telephone of video offerings.31

27See Jackie Krafft and Evens Salies, Why and How Should Innovative Industries With High

Consumers Switching Costs be Re-Regulated(2007), available athttp://hal.archives-ouvertes.fr/docs/00/23/92/89/PDF/ConfWilliamson2007.pdf. See also Joseph Farrel & PaulKlemperer, Coordination and Lock-In: Competition with Switching Costs and Network Effects,Handbook of Industrial Organization (2007).28 For example, Comcasts terms and conditions for its $19.99 base rate high speed Internetservice states that the company may charge extra for equipment installation and taxes withoutmentioning how much those charges might be. Seehttp://www.comcast.com/shop/buyflow2/products.cspx?SourcePage=Internet&profileid=85485456-6CF6-48AE-AFE5-2AAC7939C070&lpos=Nav&lid=2ShopHSI&=& (click Terms andConditions under Performance).29 For example, Verizon charges a $99 early termination fee on its high speed Internet servicewith a monthly fee of $19.99 and a one year agreement Seehttp://www22.verizon.com/Residential/HighSpeedInternet/Plans/Plans.htm.30 For example, the activation fee for Verizons 1 Mbps High Speed Internet service is $19.99.See http://www22.verizon.com/Residential/HighSpeedInternet/Plans/Plans.htm.31

For example, Verizons $19.99 high speed DSL service offer is only available to customerswho already have a Verizon voice service. See


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The problem of early termination fees (ETFs) and their effects on preventing consumer

switching is particularly acute in the mobile industry, which will increasingly be used as a means

to access the Internet. Consumers are generally tied to two-year service contracts with ETFs as

high as $350.32 While many providers justify ETFs on the basis that they allow carriers to

subsidize equipment, these fees are charged even when the consumer is not getting any subsidy

for the phone.33

Furthermore, a new ETF period starts with every change to a service plan,

further binding the customer to one wireless provider.

B. Despite Unbundling Requirements, Other Consumer Protections Will Still BeNecessary.

In addition to high switching costs, practices that obscure costs and misinform consumers

reduce consumer confidence in service providers and reduce the effectiveness of competition in

the market for provision of broadband service. As discussed above, carriers often obscure

information about the true cost of obtaining broadband Internet service. They also do not provide

clearly accessible information about actual speeds offered. Officials at a Commission

http://www22.verizon.com/Residential/HighSpeedInternet/Plans/Plans.htm. Similarly,Comcasts $19.99/mo 15 Mbps high speed Internet offer is available only to customers whoalready subscribe to either Comcast telephone of cable service. Seehttp://www.comcast.com/shop/buyflow2/products.cspx?SourcePage=Internet&profileid=85485456-6CF6-48AE-AFE5-2AAC7939C070&lpos=Nav&lid=2ShopHSI&=& (click Terms andConditions under Performance).32See Andrew Munchbach, Confirmed: Verizon Wireless to charge up to $350 early terminationon advanced devices, Boy Genius Report, Nov. 4, 2009, available athttp://www.boygeniusreport.com/2009/11/04/confirmed-verizon-wireless-to-charge-up-to-350-early-termination-on-advanced-devices/.33A Discussion Draft on Wireless Consumer Protection and Community BroadbandDeployment: Hearing Before House Subcommittee on Telecommunications and Internet,Committee on Energy and Commerce, 110th Congress. (2008)(statement of Chris Murray,Senior Counsel, Consumers Union on behalf of Consumers Union, Consumer federation ofAmerica, Free Press and Public Knowledge), availableathttp://www.publicknowledge.org/pdf/cm-testimony-20080227.pdf.


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presentation have observed that at peak hour actual speeds are 50% less than advertised speeds.34

35 Moreover, there are number of consumer protection issues that will not be addressed with

unbundling. In a highly complex market, consumers are unable to effectively focus on all

aspects of the transaction, which can result in limited market competition.36

In addition to obscuring actual speeds, carriers do not clearly reveal their terms of

service. Many carriers reserve the right to monitor customers Internet usage, terminate service

at will and impose other service limitations such as data caps, overage charges, restrictions on

types of applications and off network usage.37

While these types of limitations on terms of

service may not be the primary factor that most consumers consider when purchasing broadband

service, they can still harm consumers. Although the competition encouraged by unbundling

may result in less oppressive terms of service, consumers will still need the Commission to patrol

these and other similar areas.

V. GOVERNMENT EFFORTS TO ENHANCE COMPETITION SHOULD BEENCOURAGED IN CONJUNCTION WITH UNBUNDLING.

A. Investment in Broadband Service by State and Local Authorities Can Provide

34Commission Open Meeting Presentation on the Status of the Commissions Process for

Development of a National Broadband Plan, Slide 26 (Sept. 29, 2009).35 The United States ranks in the middle of the third quintile in terms of average actual downloadspeeds. Berkman Study at 50.36See, e.g. Comments of Consumer Federation of America, Consumers Union, Free Press,Media Access Project, New American Foundation, and Public Knowledge,In the Matter ofImplementation of Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993; AnnualReport and Analysis of Competitive Market Conditions with Respect to Mobile Wirelessincluding Commercial Mobile Services, WT Docket No. 09-66, at 7-22 (2009).37See Comments of Consumer Federation of America et al., Consumer Information Disclosure,CG Docket No. 09-158, at 16 (2009) available athttp://www.freepress.net/files/Truth_In_Billing.pdf.


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Much Needed Competition at the Wholesale and Retail Level.

The evidence currently available indicates that government funds can help to encourage

private investment in broadband services. This encouragement can come in a number of forms.

Sometimes, government funds can be used to create the required underlying infrastructure for

broadband deployment. In other instances, government investment establishes the existence of

market demand for broadband. Additionally, government funds can be used to fix market

failures, and make broadband available to individuals that the market has deemed unprofitable to

serve.

The Study provides examples of successful government funding of broadband

deployment. The Swedish model uses municipal government funds to build physical networks,

and then relies on private providers to compete on services.38 The Swedes use this model in

major cities, towns, and rural areas, and have found that it is especially helpful in bringing

underserved areas online.39

Similarly Amsterdams CityNet project used municipal funds to build an underlying fiber

network, which was then made available on a wholesale basis to retailers to provide services to

customers.40 CityNet has become a model of how government and private industry can

cooperate to bring broadband to consumers. By shouldering the burden of maintaining physical

infrastructure, CityNet allowed numerous private companies to quickly create a competitive

private market for broadband.41

There are also numerous examples of government investment in broadband networks

38See Berkman Study at 165.39Id.40

Id. at166.41Id.


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households.

B. Federal Funding Can Also Induce Competition.

As the Study describes, national-level governments have also committed to funding

broadband deployment. Since the mid 1990s, the government of Japan has used a series of

grants, loans, loan guarantees, and tax deductions to encourage private investment in critical

broadband infrastructure.46 Similarly, South Koreas combination of government loans and a

high-profile Cyber Building Certificate system has encouraged infrastructure deployment.47

The Federal Government has already taken a significant step towards increasing

competition. The American Recover and Reinvestment Act of 200948

explicitly requires that all

recipients of stimulus funds comply with non-discrimination and interconnection obligations.49

By increasing interconnection and decreasing the ability of providers to discriminate, this

provision encourages competition between providers.

These types of obligations can be extended to other government programs. Entities that

receive public funding do so to serve the public interest. Openness encourages competition and

reduces unnecessarily duplicative capital expenditure. As the Commission moves to integrate

more federal programs into the National Broadband Plan, such as the Universal Service Fund, it

should apply these types of obligations to recipients. There is no reason that all federally

administered dollars cannot come with obligations of non-discrimination and interconnection, or

even of open pole attachments and tower sharing.

50

46Berkman Study at 195.

47Id. at 203.48 American Recovery and Reinvestment Act of 2009, Pub. L. No. 111-5, 123 Stat. 15 (2009).49

Id. at 6001(j).50See The Mother of Invention, The Economist, Sep. 24, 2009, available at


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VI. FCC HAS THE AUTHORITY TO REQUIRE UNBUNDLING ACROSSPLATFORMS.

The National Broadband Plan is meant to provide a roadmap for expanding broadband

adoption and penetration. In analyzing the Berkman Study and its recommendations, the

Commission must consider how to implement the unbundling policies the Study found effective

in promoting broadband adoption and deployment. Although the Commission could simply

recommend that Congress enact legislation to address broadband unbundling, it is important to

note that the Commission has regulatory tools at its disposal to accomplish these ends without

the need to seek additional legislative action.

A. The FCC Should Reclassify All Broadband Services as Title II Services.

In order to effectively implement an unbundling regime, the Commission should

eliminate current regulatory distinctions that separate broadband services based on delivery

method. These current distinctions should be replaced with a single classification of all

broadband services under Title II. Classifying all types of broadband as Title II services would

allow the Commission to extend the unbundling policies that currently apply to voice

communications51

to broadband.

Although these broadband offerings are currently regulated under Title I ancillary

authority,52 there is nothing preventing the Commission from reclassifying them under Title II.

http://www.economist.com/surveys/displaystory.cfm?story_id=14483880.51 47 U.S.C. 251(c)(2).52

In re Inquiry Concerning High-Speed Access to the Internet Over Cable and Other Facilities ,17 FCC Rcd. 4798 (2002) (declaring cable-based broadband service to be an information


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In fact, such a change is not subject to a higher standard of review than the original

determination.53 As the Supreme Court recently noted, the Administrative Procedures Act

makes no distinction, however, between initial agency action and subsequent agency action

undoing or reversing that action.54

While the Commission must proffer good reasons for its policy, it need not demonstrate

to a courts satisfaction that the reasons for the new policy are betterthan the reasons for the old

one; it suffices that the new policy is permissible under the statute, and the there are good

reasons for it, and that the agency believes it to be better, which the conscious change of course

adequately indicates.

55

The conclusions of the Berkman Study, in addition to the points enumerated above,

provide ample basis for the Commissions reevaluation and recategorization of broadband

services as Title II services and initiation of an unbundling regime.

Further, the concerns regarding competition in broadband markets that animate the

unbundling discussion are not new. The Commission faced the same concerns beginning with

the first Computer Inquiry.56 From the initiation of the Computer Inquiries in 1968 until the

Commission abolished the Computer IIIobligations in 2005, the Commission relied upon

structural separation and unbundling to create a robust and competitive information service

market protected from the danger posed by vertically integrated carriers. The hope of the

Commission that abolishing these requirements would encourage facilities based intermodal

service). Report and Order and Notice of Proposed Rulemaking, FCC 05-150, Aug. 5, 2005(declaring DSL an information service).53

See FCC v. Fox Television Stations, Inc. 129 S.Ct. 1800, 1810 (2009).54Id. at 1811.55Id. (emphasis in original).56

Regulatory and Policy Problems Presetned by the Interdependence of Computer andCommunications Services and Facilities,Notice of Inquiry, 7 F.C.C. 2d 11 15 (1966).


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competition that would provide greater benefits to consumers has demonstrably failed, whereas

the wisdom of the Computer Inquiries approach has been vindicated. The Commission has

ample evidence to conclude that bringing all broadband services under the unified umbrella of

Title II and then unbundling the services will maximize possible competition between eventual

service providers.

B. The Commission Can Impose Unbundling Requirements Without Reclassifying AllBroadband Services as Title II Services.

1. The Commissions Ancillary Authority Grants it the Power to ImposeUnbundling.

Courts analyze the Commissions ancillary authority under a two-pronged test. First,

the subject of the regulation must be covered by the Commission's general grant of jurisdiction

under Title I of the Communications Act, which . . . encompasses all interstate and foreign

communication by wire or radio. Second, the subject of the regulation must be reasonably

ancillary to the effective performance of the Commission's various responsibilities.57

There is no doubt that broadband Internet fits within the general grant of jurisdiction

under Title I of the Communications Act, as it is communication by wire or radio.58

In addition to being within the general grant of jurisdiction under Title I, in order to

invoke ancillary authority the Commissions rules must be reasonably ancillary to something.59

As the Commission itself has pointed out, that something could be any number of statutes that

57American Library Assn. v. FCC, 406 F.3d 689 at 692-93 (D.C. Cir. 2005) (quoting United

States v. Sw. Cable,392 U.S. 157, 178 (1968)).58 47 U.S.C. 152(a).59

Midwest Video Corp. v. FCC, 571 F.2d 1025, 1040 (8th

Cir. 1978), affd,FCC v. MidwestVideo Corp., 440 U.S. 689, 696 (1979).


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relate to broadband deployment and communication.60

Thus, as unbundling of broadband

services involves both interstate and foreign communications by wire or radio61 and the type of

broadband communication described in relevant statutes,62

Commission rules imposing

unbundling requirements would be well within its ancillary authority.

2. Section 706 of the Communications Act of 1996 SpecificallyEmpowers the Commission to Encourage the Deployment of Broadband

Services.

In addition to general ancillary authority over broadband communications, Congress has

imposed a specific separate responsibility upon the Commission. In Section 706 of the

Communications Act of 1996, Congress directed the Commission to encourage the deployment

on a reasonable and timely basis of advanced telecommunications capability to all Americans . . .

by utilizing, in a manner consistent with the public interest, convenience, and necessity, . . .

measures that promote competition in the local telecommunications market.63 For the purpose

of the section, Congress defined advanced telecommunications capability as high-speed,

switched, broadband telecommunications capability that enables users to originate and receive

high-quality voice, data, graphics, and video telecommunications using any technology.64

Broadband services easily fit within this definition. Importantly, this section authorizes

60In the Matters of Formal Complaint of Free Press and Public Knowledge Against ComcastCorporation for Secretly Degrading Peer-to-Peer Applications; Broadband Industry Practices Petition for Free Press et al. for Declaratory Ruling that Degradinggn and Internet ApplicationViolates the FCCs Internet Policy Statement and Does not Meet and Exception for ReasonableNetwork Management, 23 F.C.C.R. 13028 at 15-21 (adopted Aug. 1, 2008; released Aug. 20,2008) (Comcast Order).61 47 U.S.C. 152(a).62Comcast Orderat 15.63

Section 706 of the Telecommunications Act of 1996 (codified as 47 U.S.C. 157 nt).64Id.


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regulatory, as well as deregulatory, action by the Commission.65

As the Study suggests, unbundling of services does encourage the deployment on a

reasonable and timely basis of broadband services. Imposing unbundling rules specifically

designed to encourage this reasonable and timely deployment is precisely the type of

Commission action called for by Congress in Section 706.

3. The Commission Can Require the Unbundling of theTelecommunications Component of Broadband Services.

Even if the Commission is reluctant to impose unbundling requirements on all broadband

services, it can impose them on the telecommunications components of those services. In the

Brand Xdecision,66

the Supreme Court concurred with the Commissions conclusion that

[c]able companies in the broadband Internet service business offer consumers an information

service in the form of Internet access and they do so via telecommunications.67

As previous

actions by the Commission and interpretation by courts have demonstrated, the Commission can

identify and regulate the telecommunications component as a separate element.

In MediaOne Group, Inc. v. County of Henrico, Virginia,68 the court found that,

regardless of the regulatory treatment of cable modem service, the facilities used to provide

broadband access constituted telecommunications facilities within the meaning of the

Communications Act.69

This finding is consistent with the Commissions own finding that

although broadband access as offered to consumers is an information service, providers of

broadband access are telecommunications carriers for purposes of CALEA and that broadband

65Id. (b).

66Natl Cable & Telecomms. Assn v. Brand X Internet Servs., 545 U.S. 967 (2005).67Id. at 989.68

MediaOne Group, Inc. v. County of Henrico, Virginia,68

257 F.3d 356 (4th

Cir. 2001).69Id. at 363-65.


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access provided by these carriers does not fall within the statutory information services

exception to CALEA.70

4. The Commission Can Make Unbundling a Prerequisite for theInclusion of Voice Packages in a Triple Play Offering.

If the Commission would like to maintain the distinction between telecommunications

and data service, it could force providers to treat them differently. The Commission could allow

providers to offer a video and data package, classifying it as an information service, without

imposing unbundling requirements. However, if providers desire to include a

telecommunications service voice they would have to open their networks and accept

unbundling requirements. This would force all telecommunications service providers to comply

with existing unbundling requirements, while allowing existing information services to remain

beyond the scope if they so wish.

Conclusion

As the Berkman Study makes clear, a policy in support of unbundling has the potential to

accelerate the availability of high speed, affordable Internet to the public. Whether by

incorporating all broadband services into Title II, exercising ancillary authority, or separating the

telecommunications and information services elements out from broadband offering, the

Commission has the authority to implement such a policy. Once it implements an unbundling

70See American Council on Educ. v. FCC, 451 F.3d 226 at 232 (D.C.Cir. 2006). See alsoAdHoc Telecomm.Comm. v. FCC, 572 F.3d 903 (D.C.Cir. 2009) (distinguishing between residentialbroadband service and business access, classifying the later as Title II).


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policy, the Commission should strictly enforce its rules and grant the policy time and resources

required before evaluation.

Respectfully Submitted,

Public KnowledgeCCTV Center for Media and DemocracyMedia AllianceMedia Access ProjectU.S. PIRG

________/s/__________Harold FeldRashmi RangnathMichael Weinberg, Law ClerkPublic Knowledge1818 N St. NWSuite 410

Washington, DC 20036

public knowledge berkman comments in fcc gn 09 47 filed 11-16-2009

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