Remarks by American Cable Association President and CEO Matthew M. Polka
West Virginia Broadband Summit
Charleston, West Virginia — Monday, September 28, 2009
Introduction
Thank you. It’s a great honor to be with you this morning.
It is a privilege for me to be “home” here in WV because of how much time I have spent in the state as a student and graduate of WVU, and with my wife and her family who are from Morgantown.
I have been throughout the State and know firsthand the challenges the State faces to ensure widespread broadband deployment throughout.
I appreciate the opportunity to share with you ACA’s perspective on key issues facing small, independent cable and broadband providers in West Virginia
as they continue to be leaders in rolling out broadband service to consumers residing in some of the most economically challenging areas to deliver state-of-the-artcommunications technology.
ACA, Helping Smaller Cable, ACA in WV
- ACA is a trade association based in Pittsburgh, Pa., that represents more than 900 smaller and medium-sized, independent cable companies who provide broadband services for more than 7 million cable subscribers primarily located in rural and smaller suburban markets across America.
- Over the years, ACA has been successful in demonstrating that regulation has a disproportionate impact on small cable operators
-
- and that rules intendedfor companies the size of Comcast and Time Warner Cable are totallyinappropriate for an ACA member with 5,000 subscribers.
- As we talk about broadband, that distinction becomes even more critical.
- In West Virginia, ACA has 16 member companies providing cable, phone and broadband service in many counties and small towns
- including Wilkinson, Omar, Petersburg, Marlinton,Welch, Bruceton Mills, Buckhannon, Philippi, Delbarton, Varney, Justice and LowGap.
Funding the Middle Mile
- Although many focus exclusively on the need to upgrade the Internet communications path that enters the home and office, ACA has attempted to draw attention to the middle mile.
- And ACA is pleased with the high level of positive support we’ve received so far.
- For instance, of the $2.4 billion available to the Department of Agriculture’s RUS to carry out the purposes of its Broadband Initiatives Program (BIP), the agency has allocated up to $800 million in loans and loan/grant combinations for middle-mile projects.
- Why is funding middle-projects so crucial?
- ACA members upgraded their local networks long ago, providing consumers with much faster broadband speeds than old dial-up phone connections.
- Yet, we all agree that broadband speeds in many rural areas need to be much faster to create more jobs and stimulate more businesses activity that we all want to see.
- Upgrading the middle-mile link would help greatly on both counts.
- The middle mile to which I refer is the telecommunications facility than runs between a cable broadband provider’s central office and an access point to the Internet’s national fiber network.
- Because the distance between those two points can be many miles, ACA members simply don’t have the resources to construct new middle-mile links on their own.
- As ACA explained in a letter to Sen. Rockefeller in February, the middle-mile link is typically an expensive, low-capacity facility, such as a T1 line, which effectively slows down data traffic between the local cable network and the Internet backbone.
- The data chokepoint has persisted because the owners of these middle-mile facilities have failed to invest in upgrades to coincide with the last-mile investment made by ACA members.
- End-user download speeds in rural areas would be much faster if local broadband providers had access to affordable, high-speed middle-mile facilities.
- ACA members view the $7.2 billion broadband stimulus program as an important opportunity to continue their great work in constructing broadband facilities in remote and rural areas so these communities can enjoy technologically parity with densely populated urban areas so accustomed to being the first in line.
ACA AND BROADBAND STIMULUS APPS
- I’m pleased to report that in all, 83 ACA members have applied for $1.3 billion in grants and loans under the two stimulus programs run by the National Telecommunications and Information Administration (NTIA) and the RUS.
- ACA members applied for both last-mile and middle-mile projects in both unserved and underserved areas. ACA members submitted applications to fund 127 projects, including a $2.8 million project by Jet Broadband in Pineville, W.Va., which is about 90 miles south of us today.
- As companies with decades of experience in rural America, ACA members have a proud track record of achievement that ought to demonstrate why they are ideal candidates to receive funding from NTIA and the RUS to advance the goal of providing every American with affordable access to the Internet over advanced communications networks.
- I urge the NTIA and RUS to recognize that ACA members represent the best hope of extending broadband into the most economically and technically challenging areas in the country.
- I encourage the agencies to approve all of our members’ applications.
- The RUS’s large financial commitment to the middle mile was encouraging. ACA is hopeful that it can persuade NTIA and the RUS that they should not waste taxpayer dollars on funding broadband projects that intend to provide service in areas already served by ACA members.
- Overbuilding established broadband providers with taxpayer support makes no sense because it would reduce the amount of stimulus money available to provide broadband to the truly unserved and to support critical middle mile projects that I’ve already discussed.
Need ToReview Funding Restrictions
- In the first funding round, NTIA and RUS received about 2,200 applications seeking $28 billion in combined funding for broadband facilities as well as broadband awareness, training, support and construction of local computer centers.
- To say the least, that was a strong response, and we are scheduled to learn in November the names of the first entities to receive funding.
- Without diminishing the level of support for NTIA and RUS funding so far, I should explain that turnout from ACA members would have been even better if NTIA and the RUS had not attached funding restrictions that made it difficult or impossible for small cable companies to apply.
- For example, ACA members that didn’t seek funding noted that the federal government’s insistence on holding the first lien would have violated terms and conditions contained in many of their bank loan agreements, making applying for the program impossible.
- The 10-year prohibition on the sale of federally funded projects was also cited as a deterrent to participation by ACA members.
- We hope these onerous restrictions will be lifted before applications for the second round are due.
Risks to Affordable Broadband – CLOSED INTERNET CONTENT BUSINESS MODELS
- The effort by the American Recovery and Reinvestment Act of 2009 to make broadband service available to everyone in the country enjoys wide public support.
-
- For many,broadband’s promise of improving life in so many ways, on so many levels, isbuilding excitement for a government-backed technology mission that we reallyhaven’t seen since the days when the U.S. entered and won the space race afterthe launch of Sputnik by the Soviet Union.
- But successful broadband policy can’t focus exclusively on availability.
- It also must focus on affordability, keeping in mind that those on the lower end of the income scale may choose to use their disposable income on things other than the purchase of a broadband subscription.
- To keep the price of broadband affordable to all, ACA has urged Congress and the FCC to prevent broadband content providers, especially media conglomerates with market dominance, from imposing closed Internet business models on broadband access providers, which will end up forcing all consumers to pay higher monthly broadband access fees to receive content that a large percentage of them have no intention of viewing.
- Here is a real world example of what I mean: ESPN360, owned by the Walt Disney Co., is pioneering such a closed Internet business model.
- Disney wants ACA members to pay fees for ESPN360 based on the cable company’s total number of broadband subscribers or else none of the broadband subscribers may view ESPN360 content.
- Disney’s plan is designed to force customers who have no interest in viewing sporting events over the Internet to pay for ESPN360 and subsidize the cost of the service for consumers actually interested in viewing ESPN360 content.
- Disney’s ESPN360 business model is bad for competition and consumers.
- Disney’s quest to extract per-subscriber fees from broadband access providers will drive up the cost of broadband for all existing customers; put the price of broadband service beyond the means of low-income consumers; and obviously delay the arrival of affordable broadband access for every American.
Risks toAffordable Broadband – NEED FOR CONSUMPTION BILLING
- Another risk to affordable broadband is the potential adoption of regulations that would not allow broadband access providers to experiment with flexible-pricing models.
- U.S. House legislation has already been introduced that would effectively ban large broadband access providers from being able to charge higher prices to consumers who download catalogs of HD movies than to casual users who limit their Internet time to checking e-mail and visiting a few Web sites.
- Consumption-based billing is pro-consumer in every respect.
- Under such a system, high-bandwidth users would be required to shoulder the cost of their heavy Internet activity and would not be allowed to shift that financial burden onto less energetic Web surfers.
- Without consumption-based billing, extreme demands placed on the network by a small minority would have to be paid for by everyone else. That’s simply unfair.
- In addition to being unfair, a ban on consumption-based billing would frustrate the goal of universal and affordable broadband access.
- In a recent paper released in association with Georgetown University, noted economists Kevin Hassett and Robert Shapiro concluded that flexible-pricing models will speed broadband adoption, rather than deter it, because network providers won’t need to raise prices on everyone in order to recover the cost of network investments largely undertaken to satisfy the needs of those who consume the most bandwidth.
- Hassett and Shapiro’s paper found that when flat-rate plans were in use, broadband access providers were forced to recover their network upgrade costs from all users equally, which drove up the monthly price of broadband for everyone and made it harder for the most price-sensitive consumers to purchase a broadband subscription.
- Reliance on flat-rate plans, the economists said, would delay broadband adoption by low-income consumers and fail to close the digital divide.
A Final Thought: Pole Attachment Fees
- As a final thought, ACA urges policy makers to be mindful of the impact that unreasonable pole attachment fees have on small broadband providers.
- Last year, the FCC opened a rulemaking (which remains open) that called for raising cable’s pole attachment fees.
- The FCC’s proposed increase would significantly slow broadband deployment in the small and rural communities that need it most.
- To achieve its stated goal of increased broadband deployment, the FCC should be exploring ways to reduce the cost of broadband, not increase it.
- Thank you for your attention and I would be pleased to answer your questions.