Vermont Business Magazine The Department of Public Service, in conjunction with the Agency of Commerce and Community Development and the Department of Information and Innovation, has released the 2014 Telecommunications Plan public comments draft. The Plan addresses the major ongoing developments in the telecommunications industry, including broadband infrastructure development (including at least a minimum level of service to currently un-served regions), regulatory policy and recommendations for future action. The plan also includes the long-standing but elusive goal of "universal availability of mobile service along travel corridors and near universal availability statewide."
“This plan provides Vermont residents, businesses, and policy leaders with an objective assessment of how far we’ve come in the last 10 years, our successes, as well as our vision for the next ten years,”said Public Service Commissioner Christopher Recchia. “The Plan also discusses the telecommunications challenges facing Vermont, as well as realistic and attainable solutions to those challenges,” he added. Highlights of the Plan include an overview of the state’s existing broadband infrastructure and strategies for increasing speeds and affordability of broadband service.
The Plan has three primary objectives. First, the Plan is intended to inform Vermontresidents and policy makers of the current state of telecommunications services, infrastructure,and regulation in Vermont. The Plan explores how technological advances and shifts inconsumer demands have caused significant changes in how telecommunications companiesinvest in infrastructure and how residents use their services.
Second, the Plan presents readers with future challenges facing the state in providingtelecommunications. The major challenge facing Vermont is the ability of service providers tocontinue to service and expand capability in rural areas. As this Plan demonstrates, marketforces, technological advancements, and national regulatory policies have caused disruption anddysfunction in the telecom industry. As the state looks to the future, the state must overcomechallenges affecting the provision of basic service and broadband in highly rural areas.
Lastly, the Plan suggests policies and initiatives to help Vermont attain itstelecommunications objectives. While demand for telecommunications services are greater thanever, the state’s authority to regulate the market has waned. The state has adopted an incentivebased framework, in which it encourages the build-out of infrastructure through grants,expeditious permitting of facilities, and other inducements. As the state looks to the future, itmust grow existing private-public partnerships and create new relationships. The Plan outlinesten desired goals and the strategies the state should employ to meet those goals.
CURRENT STATE OFVOICE, INTERNET ACCESS, and VIDEO INDUSTRIES
a. Technology and Market Trends: 2004 – 2014
When the Telecommunications Act was signed into law in 1996, the Public Switched TelephoneNetwork (PSTN) and the Internet were nearly completely separate.2 Voice service over the PSTNwas the only plausible definition of an “essential” service. This remained largely true at thepublication of the Department’s 2004 Telecommunications Plan when competition in the telephonemarket was still establishing itself. But technological changes over the last 10 years have blurred theline between what is an essential service and what is not. One significant change is the use of packetswitching to carry voice data in the same way that information data is transmitted.
The dominant packet switching technology, voice over Internet protocol (VoIP), has allowed agreater number of competitors to enter the voice market, such as cable and Internet contentcompanies. Some companies provide voice service to fixed locations over internally managedInternet protocol (IP) networks, while other providers use IP technology to send voice traffic over thepublic Internet (nomadic VoIP). More importantly, VoIP has challenged the distinction between“telecommunication service” (or “basic service”) and an enhanced “information service.” Becausefederal law distinguishes between telecommunication and information services, and regulates eachone differently, the rise of VoIP raises an important question about what is a telecommunicationsservice. The transition from traditional circuit switched technology to IP technology is inevitable, andthe roles that states and the national government play in this transition will be crucial to determiningbasic questions about quality, reach, and affordability of basic voice service in the future.
The voice telephony market has changed in other ways. Commercial Mobile Radio Service(cellular service) has become a dominate technology in the telecommunications industry over thepast decade. The 2004 Telecommunications Plan survey indicated that an overwhelming majority ofVermont households (77%) had not even considered the idea of giving up their traditional landlineservice in favor of wireless service. Today, 29.9% of Vermont adults live in wireless-onlyhouseholds, and that number continues to increase as service expands and becomes more reliable.Recent consolidation of the wireless market has resulted in four nationwide carriers offering servicein Vermont. These carriers have made great inroads into rural Vermont, installing facilities in someof the hardest to reach places of the state. The result has been that Vermonters increasingly rely ontheir wireless devices to communicate.
The other area of great change has been in the nationwide adoption and use of Internettechnology. The Internet, which was once considered an exclusively academic pursuit, is now anessential component of modern life. In 2004, only 27% of Vermont households subscribed tobroadband (high speed) Internet service. By 2012, 76% of Vermont households subscribed to highspeed Internet.7 This increase in adoption has been the direct result of an increasing supply ofInternet applications, as people now use their connection to watch video, access social media, writeemails, work from home, and much more. The Internet has become essential to participating in themodern economy. Small and large businesses rely on the Internet to sell goods and services. Jobseekers use it to search for employment. As more Vermonters continue to adopt and use the Internet,broadband Internet access will play an increasing role in the economic success of Vermont.
Ten years ago, only 75% of the state’s locations had high speed internet access available,defined then as 768 kilobits per second (kbps) download and 200 kbps upload. In the 2011Telecommunications Plan, the state put forward a goal of ubiquitous availability of broadband at768/200 kbps with service at 10 megabits per second (Mbps) available to most locations by2013. The state met this goal, thanks to the investments and hard work of Vermont serviceproviders and state leaders. Key investments from private partners, federal stimulus, and statecapital appropriations have yielded great success in the expansion of basic broadband service.
Today, service is available in 99% of the state, with the remaining 1% having a funded solutionin place. Seventy five percent of households have access to speeds of four Mbps download andone Mbps upload, or faster.While broadband subscription rates have increased, Vermont cable companies haveexperienced a corresponding decline in cable subscriptions. The 2004 Telecommunications Plannoted a moderate increase in cable availability as cable operators expanded their plants. In recentyears, however, cable subscription has been on the decrease. In 2009, the number of in-statecable connections peaked at 139,275. As of 2012, there were 132,373, and that number isexpected to trend downward as consumers abandon cable in favor of Internet hosted video
content. The decline in cable subscriptions will likely not be fatal to cable companies, especiallythose that offer telephone and broadband service. However, the decline in subscriptions doespresent funding challenges for public access television, because public access stations derivetheir funding from revenue generated by cable video subscriptions. Declining subscriptions haveresulted in lower funding amounts for public access stations.
b. Universal Service and Inter-carrier Compensation Reform
Universal Service was, and still is, the cornerstone of telecommunications regulatory policyin the United States. Universal Service is the idea that telephone service should be available toeveryone. Both the state and federal government further this policy by managing universalservice funds. The federal Universal Service Fund benefits four programs—Lifeline, RuralHealthcare, Schools and Libraries (E-Rate), and the Connect America Fund (formally the highcost fund)—all of which are aimed at managing cost and increasing telephone penetration. In2011, having declared providing high speed Internet access to be the “universal service challengeof our time,” the Federal Communications Commission (FCC) set about the largest reform of theUniversal Service Fund since the 1996 Telecommunications Act. The FCC order, known as theTransformation Order, made two fundamental changes. It reformed interstate and intrastateinter-carrier compensation rules, and it redirected universal service support to the deployment ofbroadband in unserved areas of the nation.
The Transformation Order gradually eliminates high cost support to price cap carriers, suchas FairPoint, and provides broadband support through the newly created Connect America Fund(CAF). The Transformation Order froze support for high cost support price-cap carriers andreplaced high cost support with money tied directly to the build out of broadband facilities andthe provision of broadband service.10 Through a series of “phases” over a period of time the FCCwill distribute different sums of money, which will have various achievement goals and will beavailable to different sets of participants.
At the state level, changes in the Vermont Universal Service Fund (VUSF) provide a supportmechanism similar to the CAF. The purpose of the VUSF is to support the VermontTelecommunications Relay Services (VTTRS), telephone Lifeline Assistance, and the
development of state-wide enhanced Emergency 911 service. To finance these programs,Vermont law imposes a broad based charge (“VUSF charge”) on all telecommunications servicesthat interact with the public switched network.
The Vermont General Assembly added the Connectivity Fund to the menu of VUSF fundedprograms in 2014. Vermont service providers may now bid on grants through the VUSF to fundbroadband expansion projects. The same legislation also created the Division of Connectivity tobe under the aegis of the Agency of Administration. Its goal is to promote broadband serviceexpansion within the state. The Division of Connectivity will have the ability to apply forsupport through the VUSF and will help direct state efforts to expand broadband service.
c. The America Recovery and Reinvestment Act
The 2008 financial crisis caused profound changes to American society, many of whichnegatively impacted working families. However, Governor Shumlin, Vermont’s CongressionalDelegation, and Vermont’s telecommunications industry leaders positioned the statecompetitively with regard to opportunities created by the recession. The largest opportunity thestate benefited from was funding provided through the America Recovery and Reinvestment Act(ARRA). In 2009 Congress made available an unprecedented $813 billion in stimulus funding.
This funding included many infrastructure projects to improve roads, electricity networks, andtelecommunications infrastructure, among others.Vermont Telephone (VTel) was Vermont’s largest recipient of ARRA funds, receiving fundsto build a state-wide wireless network, fiber to the home in its landline service territory, and astatewide fiber backhaul project. Green Mountain Power, Vermont’s largest electric utility, alsoreceived ARRA funding, which it used to upgrade and expand VTel’s fiber network. Through a partnership with VTel, GMP will utilize this fiber network as part of its smart grid network. The Vermont Telecommunications Authority (VTA) also applied for, and received, ARRA funding, which it sub-awarded to Sovernet to build out its middle mile fiber network. Once complete, these projects will provide important benefits to Vermont residents and businesses, especially those in rural areas. It is important to note that the amount of federal stimulus provided to Vermont entities was unprecedented and unlikely to be repeated in the foreseeable future.
III. THE CHALLENGES AHEAD
The changes described above present Vermont with three fundamental challenges. First, Vermont will need to grapple with the question of how to increase the speed of available broadband services. Second, Vermont will be faced with the challenge of maintaining basic voice service in rural areas. Lastly, changes in how consumers use services will require rethinking about how content is delivered in the multi-channel video industry. Questions about public access, retransmission costs, and the viability of the existing cable plant will turn on consumers’ expectations for broadband and video services.
As discussed above, providing broadband service in rural areas is costly. National reform to the Universal Service Fund will help bring a basic level of service to rural areas. This support is contingent upon Vermont service providers accepting broadband specific universal service obligations. Furthermore, this support is unlikely to bring every Vermonter the level of service necessary for the state to remain economically competitive.
The goal announced in The Vermont Telecommunications Plan 2011: Broadband was to ensure that every address11 in Vermont have access to broadband with the minimum technical requirements of four Mbps download and one Mbps upload by year end 2020. Also, by year end 2020, a majority of addresses in Vermont should have access to a broadband connection with speeds of at least 100 Mbps download and 100 Mbps upload. These speeds exceed the capabilities of existing deployed technology. In many cases this will mean procuring fiber to the node (FTTN) or fiber to the home (FTTH) in rural, high cost areas. As Vermont looks to the future, it must determine the efficacy of maintaining or increasing these benchmarks.
Support for basic voice service has diminished since the Transformation Order. Vermont will be faced with hard questions about how to supply service in high cost, unprofitable areas. Additionally, incumbent local exchange carriers (ILECs) face fierce competition in the denser, more profitable regions of the state. One report written on behalf of the Department of Public Service called Vermont a “daunting place to provide service,” noting that in 2011 all Vermont incumbent telephone providers reported an aggregate net operating loss of $39 million.
The same report predicted continuing losses for the foreseeable future. Yet despite high costs and line losses, every ILEC has an obligation, as carrier of last resort, to make service available to every location in its territory. To ensure that service continues in all areas of the state, Vermont will need to formulate policies that will encourage telecom providers to retain and expand voice service in high cost areas.
Lastly, changes in ways video content is delivered to consumers have caused disruption in the multichannel video industry. Consumers are increasingly migrating to Internet-based content providers and are increasingly watching content “on demand.” A decline in cable subscription rates has meant a decline in revenues for public access television stations. A decrease in viewership means the relevance of public access through cable is called into question. As the state contemplates cable video policy, it should assess the value of public access television to consumers, and think about how consumers should pay for that content.
IV. VISION
While the state’s regulatory authority over telecommunications has diminished, its interest in maintaining affordable and reliable service has not. As this Plan looks to the state’s telecommunications future, it is important to have a sense of what that future should look like. The Department views the following goals as an essential part of supporting and growing a reliable telecommunications network throughout the state of Vermont.
1. Broadband Speed. Every address
2. Broadband Deployment. Every address in Vermont should have access to wired and wireless broadband Internet access service. in Vermont should have broadband Internet access with the minimum technical requirements of 4 megabits per second (Mbps) download and 1 mbps upload. By year end 2020, a majority of addresses in Vermont should have access to the Internet at speeds of at least 100 Mbps symmetrical, and all addresses should have access to speeds of at least 10 Mbps download. By 2024, every address should have broadband with minimum technical requirements of 100 Mbps symmetrical.
3. Affordability. Broadband service should be affordable to all customer classes.
4. Local Public Generated Content. The state should promote locally generated content that is used and useful to communities.
5. Adoption and Usage. Vermont should support the universal adoption and use of broadband service at home and at work.
6. Mobile Service. Vermont should have universal availability of mobile service along travel corridors and near universal availability statewide.
7. Basic Service. Vermont should have reliable, economical telephone service in all areas of the state, including rural areas. All residents, regardless of income or location, should have access to basic telephone service.
8. Enhanced 911. Vermont should have available the best possible E-911 service. The state should endeavor to find greater efficiencies within the e-911 system while maintaining and enhancing public safety.
9. Competition – Vermont’s telecommunications marketplace should be competitive, and all Vermonter’s should reap the benefits of competition.
10. Regulatory Fairness – Like services should be regulated alike, regardless of the platform or technology used to provide the service.
To meet Vermont’s telecommunications goals, the following strategies should be pursued:
1. Vermont should provide universal service support for broadband build out projects. Vermont should require that all projects receiving public monies meet the minimum technical objectives set by the Department of Public Service.
2. Vermont should encourage the expansion of commercial mobile radio service by maintaining the existing permitting process for telecommunications facilities.
3. Vermont should continue its wireless and broadband mapping initiatives with or without federal support.
4. Vermont, through the Public Service Board, should examine existing cable line extension rules.
5. Vermont should assess the value of public access stations to the communities they serve and explore new ways in which local content can be cost effectively generated and disseminated to consumers.
6. The Department of Public Service and Public Service Board should continue a regulatory framework that facilitates competition, while assuring affordable basic service rates, high quality of service, consumer protection, and universal service.
7. Vermont policy makers should carefully consider the potential negative outcomes of state and municipalities directly competing with private firms in the provision of telecommunications services, especially in areas where consumers are adequately served. Vermont should refrain from policies, including financial incentives, that have the net effect of diminishing competitive choice in the marketplace.
8. The state should refrain from enacting laws that regulate like services differently. Vermont policy makers should advocate for national reform measures that regulate substitutable platforms similarly. As cross-platform competition increases, the state and national regulatory framework should equally regulate all service providers without regard to the way in which service is provisioned.
9. Vermont should stimulate demand for broadband service by promoting skills training programs and instituting policies for reducing the cost of broadband service for low income families.
V. BROADBAND ACTION PLAN
The State of Vermont has a legislated goal of universal availability of broadband Internet access services.14 In the short term, legislation indicates that Vermont seeks to provide each service location in Vermont with access to Internet service that is capable of speeds of at least 4 Mbps download and 1 Mbps upload (“4/1”).
Over the longer term, legislation indicates that Vermont seeks to ensure that every business and residential locations in Vermont has infrastructure capable of delivering Internet access with service that has a minimum download speed of 100 Mbps and is symmetrical (“100/100”).
• It is projected that the Federal Communication Commission’s (FCC) Connect America Fund (CAF) Phase II program will, by 2020, bring universal availability of broadband Internet access at 4/1 to service to census blocks that are completely unserved. To achieve these goals, the Department presents this Action Plan consisting of the following initiatives:
• The State of Vermont’s Connectivity Fund (including the High-Cost Program and the Connectivity Initiative) supported by the Vermont Universal Service Fund, will be directed to bring service to partially-served areas of the state. This will include areas that lack complete access to services meeting the minimum technical objectives (“Objectives”) , but that are excluded from the CAF II program because they are partially served. This initiative will be aligned with the FCC program for universal availability at 4/1 by 2020. This will require two steps:
o The Department will work with the Public Service Board to ensure that support from the High Cost Program is directed to these partially served areas.
o In identifying areas eligible for Connectivity Initiative grant funding, the Department will develop and employ an inventory of infrastructure that is available or reasonably likely to be available to support provision of services to unserved areas to ensure that the Connectivity Initiative funds are directed to these partially served areas.
• After the goal of universal availability of 4/1 is met, the focus will be brought on furtherance of the goal of ensuring universal availability at 100/100.
• The Telecommunications Plan will define the Objectives22 to evolve over time as related below.
o 2014: 4/1
o 2017: 10/1
o 2020: 100/100
• The Objectives serve two specific purposes:
o Locations lacking services at these speeds will be eligible for State support
o Grantees accepting State support will be obligated to provide services at these speeds , and
• The Department , in cooperation with the Connectivity Division, will pursue additional strategies to meet the broadband goals outlined in statute, including:
o Identify and aggregate shared customer access objectives
o Develop manageable, replicable deployment models
o Coordinate opportunities and stakeholders to advance economic development, education, public services, and healthcare
o Coordinate multiple federal grant programs
o Provide technical support for funding applications
o Tap both private and public funding sources
o Give technical support to State agencies to leverage federal funding
How this Plan is Organized
Vermont law directs the Department to prepare a plan addressing five subjects. This document follows that format, providing readers with chapters that address the statutory criteria in turn. Chapter one describes the future needs of Vermont’s telecommunications infrastructure, looking ten years into the future. This chapter also discusses relevant events of the last ten years, and how those events have shaped the present. Chapter two is the Telecommunications Almanac. This section describes current telecom infrastructure and services. This section also provides a comparative analysis of Vermont relative to other states. Chapter three addresses the public input. The Department commissioned a survey of Vermont residences and businesses to assess the telecommunications needs of consumers. Chapter Four is a report, prepared by the Department of Information and Innovation, that describes the telecommunications infrastructure needs of state government. Chapter Five outlines the state’s policy goals and strategies for the next ten years. This section outlines a vision of what Vermont’s telecommunications systems ought to be and how Vermont can build them. This plan also outlines aggressive, but realistic, strategies for making this Plan’s vision a reality.
HEARINGS:
The Department will hold three public hearings on the public comments draft of the Plan prior to adopting the final Plan. The hearings will be held as follows:
Holiday Inn, Oak Room, 1068 Williston Road, Burlington, Vermont onMonday, August 25, 2014 at 7:00 p.m.; Hampton Inn, 1378 Putney Road, Brattleboro, Vermont, on Tuesday, August 26, 2014 at 7:00 p.m.; Alumni Hall at 16 Auditorium Hill Road, Barre, Vermont onWednesday, August 27, 2014 at 7:00 p.m.; and Hampton Inn, 47 Farrell Road, Rutland, Vermont onThursday August 28, 2014 at 7:00 p.m.
Copies of the draft plan and information about the comment period may be obtained from the Department of Public Service by visitinghttp://publicservice.vermont.gov/publicationsor by calling(802) 828-4003. Copies may also be requested by email sent to[email protected], or by writing to the Department of Public Service, 112 State Street, Drawer 20, Montpelier, VT 05620. We welcome and encourage commentary on the Plan. Comments may be submitted either electronically or by mail to the address above.
Source: Vermont DPS 8.6.2014