TMCnews Featured Article

Leaked details of the Federal Communications Commission designs for the National Broadband Plan suggest an approach that is light on new government spending and incremental in its thinking, with two exceptions.

 

Some might characterize a proposal for $25 billion in new spending as ambitious. It isn’t. That proposal earmarks $12 billion to $16 billion, to spent over 10 years, to build a wireless broadband network for public safety applications useful to police and firefighters, for example. That leaves about $9 billion to $13 billion for targeted construction of rural access lines, and might be spent over a decade as well.

 

The FCC (News - Alert) plans to offset the hefty spending on NBP with the revenue generated through a spectrum auction, at least in part.

 

The FCC aims to auction a portion of the public-safety spectrum called the “D-block” in 2011 to fund the spending plan.

 

Probably more important is a recommendation that the Universal Service Fund (budgeted at $9 billion for fiscal 2011), which subsidizes phone services in rural areas, be shifted over time to supporting broadband access instead.

 

There are two key areas where the plan might encounter significant opposition, as well as doubts about feasibility.

 

The plan apparently would rely on private sector actions to achieve its big stretch goal of 100 Mbps service, available to 100 million U.S. homes, by 2020.

 

The plan also envisions reallocating as much as 500 MHz of wireless spectrum, shifted from local broadcasters, who now use the spectrum, to wireless providers.

 

The first initiative likely will face skepticism by carriers who believe consumers will not pay much more than they do today to get 100 Mbps service where today they get access at about 3 Mbps to 7 Mbps for about $40 to $45 a month.

 

The FCC’s own analysis suggests investment of as much as $300 billion might be needed to connect 100 million homes for such capabilities. Over a 10-year period that implies spending of about $30 billion a year.

 

The second initiative will encounter already-announced opposition from broadcasters, who would like to find other revenue-generating uses for existing spectrum.

 

The tension here is clear. If in fact broadcasters can be induced to sell their spectrum, that would require raising of perhaps $60 billion to $150 billion in investment capital, just to acquire spectrum, based on cost ranging from 40 cents to $1 per megahertz of spectrum, multipled by the number of potential uses (300 million).

 

Those needs will compete directly with investment capital to upgrade the fixed network. And that is going to be the big rub.