Response to National EBS Association Comments Regarding Use of 2.5GHz EBS-Based Wireless Broadband Facilities to Achieve BTOP Initiatives
Introduction
There is no doubt that the 2.5GHz Educational Broadband Service band will provide an extremely cost effective and viable solution for enhanced broadband services and applications in un-served, under served or rural communities. This spectrum, along with other licensed and un-licensed spectrum (e.g. 3.65GHz) could also be used in urban and suburban markets to facilitate ubiquitous and interoperable broadband infrastructures throughout the nation.
The NTIA, RUS and the FCC are tasked with developing a broadband plan for the nation by February 2010. The 2.5 GHz EBS band should be closely researched and scrutinized to first analyze the FCC policy and rule changes in this spectrum
[1], and then determine who controls the spectrum
and who has leased the spectrum. BTOP should fully exploit these spectral assets to empower our communities, municipalities, local governments, cities and counties to build out their own interoperable broadband wireless infrastructures using this spectrum with private sector monies incentivized by matching or partial funding by BTOP.
However, use of the 2.5GHz EBS band for BTOP initiatives presents an interesting challenge for NTIA and RUS due to the FCC policy and rule changes implemented back in 2004. These changes altered the landscape and value of this spectrum and allowed large incumbent service providers (Sprint, Clearwire) to acquire leasing rights to more than eighty-five (85) percent of this spectrum from non-profit agencies across our nation.
These non-profits include state government agencies, state universities and university systems, public community and technical colleges, private universities and colleges, public elementary and secondary school districts, private schools (including Catholic school systems in a number of large metropolitan areas), public television and radio stations, hospitals and hospital associations, and private, non-profit educational entities.
How and why did the FCC allow this to happen?
It is their intention to offer WiMAX based Fourth Generation or “4G” wireless services on this spectrum. Intel has announced their laptop silicon chip sets (Rosedale 2) will support WiMAX mobile technology in only four bands of spectrum, one of which is the EBS band. The FCC recently approved (Election Day, 2008) Sprint and Clearwire merging their spectrum holdings to form “CLEAR[2]”
Long term leases of this spectrum (15-30 years) were negotiated with these non-profit Licensees at extremely undervalued terms3]. This can be attributed to the tactics used by potential Lessees during negotiations to secure these long term leases and to the lack of proper due diligence on the part of non-profit Boards of Trustees and their assignees to perform basic diligence including analyzing and forecasting the value of their spectrum, technology standards, cost basis, CaPex, OpEx and revenue models[4].
However, this did not happen and Boards of trustees were impelled to sign these long term leases under the assumption that CaPex would be too high. This discouraged Boards of Trustees and their assignees from forecasting current and future CaPex, OpEx and revenue models that would have favored build out of their own core broadband infrastructure using the asset they have maintained for decades. This eventually lead to only one alternative… accept the lucrative offer as put forth by Sprint or Clearwire due to the responsibilities of Boards of Trustees to the constituency they serve.
It is ironic that the very agencies that hold and manage the rights to their 2.5GHz Educational Broadband Service (EBS) are the same agencies that now will potentially become their own customers and consumers and pay a premium to Sprint and Clearwire. Even worse is the fact that all of these non-profit agencies are the very agencies that were represented as potential applicants to BTOP during the BTOP public roundtable meetings and panelist discussions.
Had these non-profits in medium and large MSA’s not succumbed to the lure of under valued upfront cash payments and residual lease payments these non-profit EBS License holders would be in a position to generate much higher gross revenues by establishing public/private partnerships with local (W)ISP’s, governments, communities, cities, counties, school systems, public safety/first responders, health care and other stake holders through private sector investment that would facilitate exponential job creation and greatly enhance BTOP and ARRA initiatives and programs.
Instead, all of these agencies and tenants must go through the 2.5GHz EBS spectrum “middle man” to obtain the services critical to sustaining their own infrastructures.
The 2.5GHz Educational Broadband Service - Rural Telecommunication and Energy Cooperatives vs. Urban and Suburban Markets
Brief History
The National Rural Electric Cooperative Association (NRECA)
Electric cooperatives are private, independent electric utilities, owned by the members they serve. Democratically governed businesses, electric cooperatives are organized under the Cooperative or Rochdale Principles, anchoring them firmly in the communities they serve and ensuring that they are closely regulated by their consumers[5].
The National Rural Telecommunications Cooperative (NRTC)
NRTC was founded in 1986 by the National Rural Electric Cooperative Association (NRECA) and the National Rural Utilities Cooperative Finance Corporation (CFC). NRTC provides products and services developed specifically to meet the needs of rural utilities and their customers, such as high-speed Internet access via satellite, full service Internet access and support, automated meter reading, SmartSCADA, wireless technologies, power quality products, long distance programs, mobile phone service, IP backbone services, direct broadcast satellite service (DBS) with DIRECTV and Internet protocol television (IPTV)[6].
By the numbers:
Ø 40 million people in 47 states.
Ø 17.5 million businesses, homes, schools, churches, farms, irrigation systems, and other establishments in 2,500 of 3,141 counties in the U.S (80 percent of the nation’s counties).
Ø 12 percent of the nation's population.
2.5GHz EBS Broadband Wireless and Telecommunication/Energy Cooperatives Provide Distinct Advantage – Perfect Model for BTOP
During their haste to secure long term leases from non-profit EBS License holders in major metropolitan urban and suburban markets Sprint and Clearwire passed over many rural markets simple because they determined that the revenue was not there and did not suit their ROI models.
Enter BTOP. Rural markets in the United States are now poised to set the standard not only for enhanced broadband wireless infrastructures, services and applications but to bolster consumer awareness, adoption and advocacy of their existing Telecommunications and Energy Cooperatives that now exist.
The NRECA and the NRTC should begin immediately to determine who is in control of the 2.5GHz EBS band in their respective markets[7]. The advantages of being able to use this spectrum in conjunction with 3.65, 5.n, 4.9 and 2.4GHz spectrum are tremendous for their existing consumer base. And by offering new state-of-the-art broadband wireless facilities they will inevitably attract new customers to their cooperatives.
The broadband service applications surrounding these cooperatives are also very conducive to sustainable BTOP and ARRA programs. This includes ubiquitous high speed wireless network access from anywhere within the coverage area, much improved IP based communications and facilitating much needed two-way residential and commercial energy control and conservation programs leading to smart grids and local energy storage at the home.
There are far too many broadband service applications to mention but all one has to realize is that by encompassing energy control and conservation, telecommunications and enhanced broadband infrastructures and applications, all of which all are managed, operated and overseen by the consumers they serve represents a pivotal fundamental improvement to traditional business models offered by large broadband service providers in medium and large sized metropolitan, urban and suburban markets.
Urban and Suburban markets are not so lucky. First, most consumers in these markets are beholding to behemoth service providers for their broadband and energy needs and these consumers have no participation or public input regarding development, deployment or functionality of the networks. Costs remain high while technological advances remain dormant.
As newer state-of-the-art wireless facilities are introduced in rural markets it is the urban and suburban markets that will become “under served” thanks to the blatant support of large incumbent service providers by the FCC and their policy/rule changes in both the 2.5GHz and 700 MHz spectrum.
Maybe large incumbents will be able to match rural speeds and QOS in urban and suburban markets but they will not be able to match the low costs and overall community benefits derived from operating under cooperative business models, as in rural markets.
The Backwards Lease - 2.5GHz EBS Spectrum
If current operating and revenue models hold true as proposed by Sprint, Clearwire and the FCC this is what the American people, Local Governments, Municipalities, Cities and Counties can expect:
By restructuring this model based upon BTOP’s desire to use the 2.5GHz EBS band and the need for a national broadband plan the following is presented: (click on image for larger view)
The above graphic represents a much better model where development, deployment, management and revenues are overseen by Public/Private Partnerships formed in which the network will reside. Profits can be used to enhance CORE applications, bolster new or existing community outreach programs, or to support ongoing BTOP or ARRA programs
.
As per the NEBSA:
Section 6 of COMMENTS OF THE NATIONAL EBS ASSOCIATION
EBS Licensees and Their Partners Should be Eligible to Apply for Stimulus Funds
“Given the eligibility requirements of the FCC, EBS licensees are clearly already eligible under the Recovery Act to apply for NTIA BTOP grant funds. In addition, in recognition of the fact that, in many or perhaps most cases, EBS licensees will be partnering in broadband projects with other entities (including commercial excess capacity lessees of their spectrum), the NTIA should determine that such entities seeking funds jointly with EBS licensees to deploy broadband with and through the capacity made available over EBS stations should be eligible for BTOP grant funds.”
Comment:
The NTIA and RUS need to be very careful, diligent and transparent in their grant/loan application and approval processes regarding use of 2.5GHz Educational Broadband Service band in association with BTOP. In addition, all EBS Licensees should be required to provide full public disclosure regarding the details of their lease, including assessed market value of Licensee spectrum and subsequent lease value offered from Lessees to the non-profit Licensees for long term lease of their spectrum.
This spectrum should be closely scrutinized as to the participation of Lessees partnering with EBS Licensees and providing broadband services using “excess capacity of their spectrum”. In most every large metropolitan service area (MSA) Sprint or Clearwire[8] has acquired long term lease rights to this spectrum through their parent Companies or Subsidiaries[9].
The FCC allowed Sprint (Nextel) and Clearwire to approach un-suspecting and non-technical savvy Boards of Trustees, with checkbooks in hand, to secure 15-30 year long term leases of this spectrum. In many cases these licenses needed to be renewed and Boards of Trustees were not even aware they had rights to this Community asset.
What was borne of this is a Monopoly with Sprint and Clearwire (now “CLEAR”) in control of 85%+ of this Community 2.5GHz EBS band across the Nation[10].
If the NTIA and RUS decide that use of the 2.5GHz band, through Licensees and their partners in Rural markets, is a viable and sustainable facility to service these markets then local non-profit Licensees in medium and large sized Urban and Suburban markets should be allowed to terminate these long term leases and reissue RFI’s and RFP’s to explore:
- The benefits of building out their own 2.5GHz band infrastructure within their Communities, Cities, Municipalities and Counties through local (W)ISP’s and private sector investment;
- The benefits of forming local Public/Private Partnerships to determine the needs of their local constituency and to manage operations and revenue derived from the network;
- CapEx and OpEx models;
- Revenue models – which will greatly exceed the undervalued monetary considerations offered through the lease of their spectrum and;
- The overall benefits to their Communities, Cities, Municipalities and Counties in identifying direct synergistic value of developing and deploying their own core network in conjunction with BTOP and ARRA programs as a whole.
By allowing qualifying EBS Licensees, in conjunction with local City, County, Municipal or Community Public/Private Partnerships, the ability to launch their own 2.5GHz, 3.65GHz, 5.nGHz and 4.9GHz (public safety) broadband wireless infrastructures, formed as a Public/Private Partnerships, to provide core network and internet access for their Citizenry, Businesses, Local Governments, Communities or Constituents in Urban, Suburban and Rural markets, and receive recurring revenue from core services on these networks, would provide for the following:
Ø Very attractive investment and ROI models to unleash private sector monies and credit markets
Ø Enhanced Public Safety, First Responder Applications
Ø Municipal Departmental Applications
Ø Reduced cost communications and internet core access for Residents, Businesses, Visitors and Tourists
Ø VoIP (Voice over Internet Protocol using any qualified provider or proprietary build)
Ø High speed ubiquitous broadband wireless communications and internet access for Urban, Suburban and Rural markets
Ø Ubiquitous roaming and interoperability amongst County, State, and National networks
Ø Health Care and TeleMedicine Services
Ø Digital Access, Inclusion, Literacy Programs (Low-Income Households, Digital Connectors Programs)
Ø Economic Stimulus
Ø Destination Market services, portals and applications
Ø Public access “television”
Ø Public Utility Services
Ø Local business internet marketing services, residential, and community portals
Ø Deploy New Energy Technologies / Energy Management Services (EMS) / Green Initiatives
Ø Matching rebate scheduling and/or energy credits through the State Energy Offices
Ø School System Enhancements / Educational Tools
Ø Public Employee Services
Ø VPN’s / VAR’s / Reseller Services
Ø Increased Computer and Access Capacity / Skills Training
Ø Employer Outreach / Distance Learning & Training (Libraries, Community Colleges)
Ø Exponential Job Creation by providing core communications and internet access in Urban, Suburban and Rural markets
Ø Visitor Services / Hospitality Packages
Ø Private Security / Video Surveillance / DVR Remote Access
Ø Ability of local broadband infrastructures to fully exploit the synergies available through the BTOP and programs offered through the new American Recovery and Reinvestment Act (ARRA) of 2009 as a whole.
While the comments put forth by the NEBSA paint a very rosy picture for the future of education and broadband in this Country the fact remains that the FCC allowed these EBS Licensees to lease 95% of their available 2.5GHz EBS[11] band to operators Sprint and Clearwire (now “CLEAR”) in major MSA’s. The upfront monies and revenues involved and generated through these lease deals will only benefit large incumbents Sprint, Clearwire, Comcast, Time Warner, Google, Intel and Bright House[12] and the constituency base of the non-profit Licensee. As a result of this partnership Comcast and Time Warner can now use our Community 2.5GHz band to fulfill upon their needs for a wireless strategy and compete to pull every dollar possible from our Communities, Municipalities, Cities and Counties.
The fact that these large incumbent operators were allowed by the FCC to coerce our local non-profits into giving away this very valuable Community asset is the very definition of discriminatory practices on the part of the FCC in their support of Sprint and Clearwire and blatantly conflicts with FCC policy and rule changes set forth in the 2.5GHz band transition[13].
In most cases Rural Licensees of this spectrum will have the advantage of partnering with local service providers, rather than large incumbents, which will ultimately lead to much cheaper and faster service than that which will be offered to their Urban and Suburban counterparts through large incumbents… not to mention that the revenues from Rural broadband infrastructures will remain (be spent) within that market while revenue from Urban and Suburban markets will leave that market to line the pockets of large incumbents.
Large incumbents should have the opportunity to lease space on available 2.5GHz EBS spectrum after Public/Private partnerships have been formed and build out of core broadband infrastructure and services has been established. There will be plenty of demand for their enhanced and extended services and if structured properly should not affect their bottom line. But they should not be in control of local network infrastructures that can provide much needed revenue for cash starved Communities, Municipalities, Cities and Counties
As per the NEBSA:
7. The Consultative Role of States Should Include Local Governments and Community Institutions
“When considering the views of the States as contemplated by the Recovery Act, NTIA should also consider the views of local communities and their various government institutions. These institutions may have particular expertise that is directly relevant to NTIA’s funding decisions. For example, universities, community colleges and school districts will likely have special insight into the needs of their communities, as will local public safety agencies and other governmental entities. Expanding the “State” consultative role to include these additional institutions will improve the process and its outcomes.”
Comment:
This is the definition of a Public/Private Partnership (PPP) and each PPP can report directly to BTOP and the State (if necessary).
[1] EBS licensees are permitted to lease their excess capacity spectrum, subject to the rules adopted in the Secondary Markets Report and Order. (See Rules)
[2] Sprint Nextel Corporation (“Sprint”) and Clearwire Corporation (“Clearwire") have filed a series of applications pursuant to Section 310(d) of the Communications Act of 1934, for authority to transfer control of certain licenses, authorizations, and de facto transfer spectrum leases held by Sprint, Clearwire and their subsidiaries to a new wireless broadband company also called Clearwire Corporation (“New Clearwire”). Approved 11/4/08. Also lists Orders & Public Notices, Recorded Documents http://www.fcc.gov/transaction/sprint-clearwire.html [3] VERMONT STATE COLLEGES -- LEASING OF EDUCATIONAL BROADBAND SERVICE (EBS) SPECTRUM & COMPETITIVE BIDDING REVIEW; “Our information suggests that VSC likely did not receive full fair market value for its licensed spectrum asset and likely would have received higher compensation through a competitive bidding process.”(pg. 16, Thomas M. Salmon, CPA, Vermont State Auditor ) http://www.accessdelray.org/pdf/vermont_case_study.pdf [4] VERMONT STATE COLLEGES -- LEASING OF EDUCATIONAL BROADBAND SERVICE (EBS) SPECTRUM & COMPETITIVE BIDDING REVIEW; “While VSC was not required to seek a professional appraisal or valuation of its EBS licenses, or technical advice from expert outside counsel, prior to entering into a long term lease, it should have done so as a matter of proper due diligence. Broadcast spectrum is a scarce resource and a professional valuation would, in our opinion, have served VSC well.”(cvr. Ltr, Thomas M. Salmon, CPA, Vermont State Auditor) http://www.accessdelray.org/pdf/vermont_case_study.pdf
[8] WT Docket No. 08-94; Sprint Nextel Corporation (“Sprint”) and Clearwire Corporation (“Clearwire") have filed a series of applications pursuant to Section 310(d) of the Communications Act of 1934, for authority to transfer control of certain licenses, authorizations, and de facto transfer spectrum leases held by Sprint, Clearwire and their subsidiaries to a new wireless broadband company also called Clearwire Corporation (“New Clearwire”). http://www.fcc.gov/transaction/sprint-clearwire.html [10] In the Secondary Markets Report and Order, the Commission took important first steps to facilitate significantly broader access to valuable spectrum resources by enabling a wide array of facilities-based providers of broadband and other communications services to enter into spectrum leasing arrangements with Wireless Radio Service licensees. http://wireless.fcc.gov/services/index.htm?job=licensing_1&id=ebs_brs
[12] Sprint Nextel (NYSE: S) and Clearwire are reviving their WiMax effort with an unusual array of partners from the tech and media industries. Comcast (NSDQ: CMCSA), Google (NSDQ: GOOG), Intel (NSDQ: INTC), Time Warner (NYSE: TWX), and others are investing billions of dollars in a new company that plans to build a nationwide high-speed wireless network using the still unproved WiMax technology standard. [13] In the Secondary Markets Report and Order, the Commission took important first steps to facilitate significantly broader access to valuable spectrum resources by enabling a wide array of facilities-based providers of broadband and other communications services to enter into spectrum leasing arrangements with Wireless Radio Service licensees. http://wireless.fcc.gov/services/index.htm?job=licensing_1&id=ebs_brs
