FCC National Broadband Plan Taking Shape

[Source: (Stifel Nicolaus) Washington Telecom Media & Tech Insider, March 3, 2010]

Plan to Offer Blueprint for FCC Rulemakings and Proposed Actions by Congress, Others

• THE BASICS: TIMING, OBJECTIVES. The Federal Communications Commission’s National Broadband Plan is heading into the home stretch. The plan is due to Congress on March 17, with FCC commissioners scheduled to vote on broadband goals, but not the plan itself, on March 16. The plan is to provide a framework and benchmarks for achieving universal broadband, with a focus on deployment, affordability, adoption, and innovative uses.

• FCC IMPLEMENTATION PROCEEDINGS. The FCC will look to implement proposals (and sort out options) under its jurisdiction through numerous rulemakings starting in the weeks (and months) after March 17. We expect the plan, which is likely to run hundreds of pages, will yield much data, ambitious aspirations (100 mbps for 100 million homes), and policy direction, but considerable existing internal agency analysis may be contained in the notices kicking off the rulemakings. The agency will likely push to complete many proceedings with orders over 12 to 18 months.

• PROPOSALS FOR CONGRESS, AGENCIES, STATES/LOCALITIES. On some issues, the FCC will seek action by Congress, other federal agencies, states/localities, and others to implement its recommendations. We believe major FCC legislative proposals would be difficult to enact during this Congress, given industry and lawmaker divisions.

• USF, SPECTRUM KEY ON DEPLOYMENT. The FCC has orchestrated a roll-out that is providing some illumination of issues leading up to the plan’s release, including on universal service, spectrum, and public safety. Two goals — reforming the $8 billion universal service fund (as well as related intercarrier compensation, which includes implicit ILEC/RLEC subsidies) and making more spectrum available for wireless broadband — appear to be critical to FCC efforts to spur deployment in unserved areas and boosting speeds and competition where broadband service already exists.

• BROADBAND ADOPTION, NATIONAL PURPOSES, AND THE ECOSYSTEM. The plan will also emphasize increasing broadband adoption and using broadband to address certain “national purposes,” such as education, energy, and health care. These initiatives create the potential for driving up broadband use that could boost the entire “ecosystem,” and could create discrete pockets of opportunity; for example, for companies managing data implicated in medical records, or providing online materials for schools.

• INDUSTRY OPPORTUNITIES, OVERHANG. The plan is just a plan, and there is a long distance between proposals and final decisions, and between aspirations and actualities. That said, we see possible upside for firms providing equipment for broadband network deployment, including routers, towers, and fiber; for Google and application providers benefiting from increased adoption; for opportunistic spectrum plays, including by MSS providers and NextWave; for wireless carriers that need more spectrum; for Sprint if intercarrier (and other) charges cut; for CLECs that may get some targeted network access help eventually (even if plan is cryptic); and for those companies able to find innovate ways to use broadband to improve health care, education, and energy performance, including those managing large amounts of data. Those with potential downside include Cisco and Motorola on the video set-top box gateway, RLECs and wireless “CETCs” on intercarrier rates and USF, respectively; and broadcasters if a planned voluntary spectrum repurposing becomes mandatory. The Bells (and to a lesser extent, cable) could gain from full USF/intercarrier reform, though gains could be offset by related issues that may not be squarely tackled by the plan, including special access and net neutrality.

• ISSUE SNAPSHOT. See pp. 2-3 for summaries of key issues and our sense of the FCC’s thrust and implications (downloadable below).

For more infomration and disclosures, download a summary report below.