Vonage Comments on Stimulus Broadband Funding Programs.DOC
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Vonage Comments on Stimulus Broadband Funding Programs.DOC Vonage Comments on Stimulus Broadband Funding Programs.DOC Document Transcript

  • Before the Department of Commerce - National Telecommunications and Information Administration and the Department of Agriculture - Rural Utilities Service In the Matter of ) ) American Recovery and Reinvestment Act ) Docket No. 090309298-9299-01 of 2009 Broadband Initiatives ) ) COMMENTS OF VONAGE HOLDINGS CORPORATION IN RESPONSE TO NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION AND RURAL UTILITIES SERVICE JOINT REQUEST FOR INFORMATION Brendan Kasper Senior Regulatory Counsel Vonage Holdings Corp. 23 Main Street Holmdel, New Jersey 07733 Tel.: (732) 444-2216 Email: brendan.kasper@vonage.com Dated:April 13, 2009 A/72918240.2
  • TABLE OF CONTENTS Page I. Introduction..................................................................................................1 II. The Internet Has Driven Tremendous Economic Growth and Job Creation -- and NTIA Should Impose Conditions To Ensure That These Positive Developments are Realized and Sustained On Taxpayer-Funded Networks......................................................................................................6 A. The Openness of the Internet Has Been Critical in Driving Economic Growth and Creating Jobs...............................................6 B. VoIP Providers are Expected to Support Significant Job Growth and Consumer Cost Savings, and VoIP Services are Critical Broadband Applications.......................................................................................9 C. Failure to Adopt Conditions As Part of ARRA Funding Introduces Significant Perils and Runs the Risk of Lost Opportunities............10 III. In Addition To The Broadband Policy Statement, NTIA and RUS Should Provide High Level Guidance On Network Management and Require Award Recipients To “Effectively” Offer Standalone Broadband...............11 A. NTIA and RUS Should Provide High Level Guidance on “Reasonable Network Management.”.............................................11 B. Award Recipients Should Be Obligated to “Effectively” Offer Stand Alone Broadband Service...............................................................15 C. The Conditions Should Apply for the Useable Life of the Network.19 IV. NTIA and RUS Need To Establish An Enforcement Framework For The Nondiscrimination and Network Interconnection Obligations....................19 V. Conclusion.................................................................................................22 A/72918240.2
  • SUMMARY The comments provided herein focus exclusively on Question 13.c of the Request for Information (“RFI”) issued by the National Telecommunications and Information Administration (“NTIA”) and the Rural Utilities Service (“RUS”) regarding establishment and implementation of the broadband initiatives called for by the American Reinvestment and Recovery Act of 2009 (the “ARRA”). In this section, Vonage Holdings Corporation provides summary answers to the specific questions posed by the RFI, with further discussion of each point in the comments that follow. 13.c How should the BTOP define the nondiscrimination and interconnection obligations that will be contractual conditions of grants awarded under Section 6001? The FCC’s Broadband Policy Statement represents a sound start toward ensuring an open Internet, but as the FCC’s Comcast Order makes clear, the principles of that statement, standing alone, will not suffice. NTIA and RUS should provide high- level guidance on what constitutes “reasonable network management” of taxpayer- funded networks by establishing several presumptions that will afford recipients with flexibility to manage these networks while also putting them on notice of the parameters of proper conduct. First, NTIA and RUS should establish a rebuttable presumption that network management that results in the blocking or material (i.e., perceptible to the end user) or degradation of a service or application that competes with a service or application offered by the network operator (or its affiliate) is unreasonable. Second, NTIA and RUS should establish a rebuttable presumption that network management that results in the blocking or material (i.e., perceptible to the end user) or degradation of interconnected Voice over Internet Protocol (“VoIP”) or any other service or A/72918240.2
  • application that is subject to 911 and E911 obligations is unreasonable. Third, NTIA and RUS should establish a presumption that it is not reasonable network management to fail to disclose to customers any practice or circumstance that could result in a broadband service being provided at speeds less than those advertised for that service. Fourth, NTIA and RUS should require that each applicant commit to a protocol-agnostic network and congestion management policy and that each award recipient file such a policy and associated compliance plans and disclosures within 45 days of any award. Finally, as explained further herein, NTIA and RUS should require that award recipients effectively offer broadband service on a standalone retail basis. 13.c(3) Should there be different nondiscrimination and network interconnection obligations for different technology platforms? Any non-discrimination and/or network interconnection obligation established as a condition for BTOP funding should be flexible enough to apply across all technology platforms. The federal government should not “play favorites” by varying its policies depending on the technology platform. The goal of NTIA and RUS should be to follow those polices established in the ARRA for broadband deployment in a neutral manner, and in the way that will best suit the public’s needs. 13.c(4) Should failure to abide by whatever obligations are established result in deobligation of fund awards? The imposition of nondiscrimination and interconnection obligations is meaningless without a means for aggrieved parties to seek enforcement of these obligations. To this end, Vonage recommends that NTIA and RUS, as part of the requisite consultation with the FCC, adopt a framework that leverages the FCC’s demonstrated expertise and capabilities in this regard with the ability of the NTIA and A/72918240.2 ii
  • RUS to impose contractual conditions on awards. As such, NTIA and RUS should require as an express condition of any award that the recipient consent and waive all objections to enforcement at and by the FCC with respect to all nondiscrimination and network interconnection obligations imposed as substantive contractual conditions of any award. However, Vonage does not believe the public interest would be served by deobligating funds for those who violate these conditions. This is not to understate the importance of the conditions, but an acknowledgement of the critical importance and overriding objective of expanding broadband services to unserved and underserved communities. 13.c(5) In the case of infrastructure paid for in whole or in part by grant funds, should the obligations extend beyond the life of the grant and attach for the useable life of the infrastructure? Yes, any non-discrimination or interconnection obligations established through a NTIA or RUS award should attach for the usable life of the infrastructure created from that award. But for the public financing of the network infrastructure, the award recipient would not have otherwise undertaken the broadband project. Because taxpayers are financing the infrastructure, it is reasonable to hold award recipients (and any future purchasers or assignees) to the non-discrimination and interconnection obligations established through the funding program as a matter of public interest. A/72918240.2 iii
  • Before the Department of Commerce - National Telecommunications and Information Administration and the Department of Agriculture - Rural Utilities Service In the Matter of ) ) American Recovery and Reinvestment Act ) Docket No. 090309298-9299-01 of 2009 Broadband Initiatives ) ) COMMENTS OF VONAGE HOLDINGS CORPORATION IN RESPONSE TO NATIONAL TELECOMMUNICATIONS AND INFORMATION ADMINISTRATION AND RURAL UTILITIES SERVICE JOINT REQUEST FOR INFORMATION Vonage Holdings Corporation (“Vonage”) submits comments in response to the Joint Request for Information (“RFI”) issued by the National Telecommunications and Information Administration (“NTIA”) and the Rural Utilities Service (“RUS”) with respect to establishment and implementation of the broadband initiatives called for by the American Reinvestment and Recovery Act of 2009 (the “ARRA”). 1 These comments focus exclusively on Question 13.c posed in the RFI, relating to the definition and scope of the interconnection and nondiscrimination obligations under the ARRA broadband funding programs. I.INTRODUCTION Congress identified five goals of the Broadband Technology Opportunities Program (“BTOP”): (1) Provide access to broadband service to consumers residing in unserved areas of the United States; (2) Provide improved access to broadband service to consumers residing in underserved areas of the United States; 1 Pub. L. No. 111-5. A/72918240.2
  • (3) Provide broadband education, awareness, training, access, equipment, and support to schools, libraries, and other institutions and organizations; (4) Improve access to, and use of, broadband service by public safety agencies; and (5) Stimulate the demand for broadband, economic growth, and job creation.2 Expanding broadband access to unserved areas and improving broadband access in underserved areas can be a powerful engine for economic growth and job creation. Such enhanced access will allow these communities and underserved populations within them to enjoy the full potential of the Internet, to take advantage of numerous features, services, and programs offered by a wide variety of providers, and to participate more meaningfully in an increasingly online world. Indeed, the Internet has been a successful engine of economic growth, innovation, and job creation largely because of its open nature -- allowing consumers and entrepreneurial firms virtually unfettered ability to interact with one another through new media and innovative service and product offerings. Competition among Internet Service Providers (“ISPs”) and broadband network providers has stimulated this environment, limiting the ability of individual firms to form roadblocks that favor particular applications, content, or other offerings.3 In the unserved and underserved areas that are the focus of BTOP and the RUS programs to be funded by the ARRA, however, competition is less likely to ensure and preserve Internet openness. In these areas, a single provider faces little to no risk that consumers can change the way in which they access the Internet, meaning that the network owner can exercise greater control over its network -- and what can be 2 ARRA, § 6001(b). 3 See, e.g. Mitchell Shapiro, High-Speed Internet Packaging and Pricing Strategies 5 (4th ed. Pike & Fischer Nov. 2007). A/72918240.2 2
  • accessed through that network -- with little to no fear of losing consumers who disagree with the way in which the network is managed. Congress recognized this risk, and wisely required that BTOP award recipients comply, at a minimum, with the Broadband Policy Statement adopted by the Federal Communications Commission (the “FCC”). 4 “To encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet,” these principles state that: (1) consumers are entitled to access the lawful Internet content of their choice; (2) consumers are entitled to run applications and use services of their choice, subject to the needs of law enforcement; (3) consumers are entitled to connect their choice of legal devices that do not harm the network; and (4) consumers are entitled to competition among network providers, application and service providers, and content providers.5 As the FCC has since made clear, these principles and the consumer choices they embody should be subject only to “reasonable network management,”6 whereby a network owner can protect its legitimate interests in operating that network but must 4 ARRA, Sec. 6001(j); see also Appropriate Framework for Broadband Access to the Internet over Wireline Facilities; Review of Regulatory Requirements for Incumbent LEC Broadband Telecommunications Services; Computer III Further Remand Proceedings: Bell Operating Company Provision of Enhanced Services; 1998 Biennial Regulatory Review – Review of Computer III and ONA Safeguards and Requirements; Inquiry Concerning High-Speed Access to the Internet Over Cable and Other Facilities; Internet Over Cable Declaratory Ruling; Appropriate Regulatory Treatment for Broadband Access to the Internet Over Cable Facilities; CC Docket Nos. 02-33, 01-337, 95-20 & 98-10, GN Docket No. 00-185, CS Docket No. 02-52, Policy Statement, 20 FCC Rcd 14986 (2005) (“Broadband Policy Statement”). 5 Broadband Policy Statement, ¶ 4 (citations omitted) (italicized emphasis in original, underlined emphasis added). 6 Id., n. 15. A/72918240.2 3
  • disclose its management practices,7 and the justification for any disparate treatment of particular applications or kinds of traffic “must clear a high threshold.”8 The FCC’s Broadband Policy Statement represents a sound start toward ensuring an open Internet, but as the FCC’s Comcast Order makes clear, these principles standing alone do not suffice to preserve openness. Particularly with respect to the kinds of networks that will be built through BTOP and the similar RUS programs -- systems in areas that are least likely to experience network competition -- there is an unmistakable public interest in ensuring that customers relying upon these publicly- funded networks are given full and free choice with respect to content, applications, services, and devices. Moreover, customers in these unserved and underserved areas are the least likely to have any meaningful prior experience with broadband services, and thus they may be unable to detect and/or to challenge questionable network management practices that undermine their use of such services. Finally, in light of the goals of job creation and economic growth that underpin the ARRA, NTIA and RUS should take steps to ensure that these goals are fulfilled by allowing consumers to make full use of innovative content, applications, and services that can help drive economic development.9 7 Formal Complaint of Free Press and Public Knowledge Against Comcast Corporation for Secretly Degrading Peer-to-Peer Applications; Broadband Industry Practices Petition of Free Press et al. for Declaratory Ruling that Degrading an Internet Application Violates the FCC’s Internet Policy Statement and Does Not Meet an Exception for “Reasonable Network Management, Memorandum Opinion and Order, File No. EB-08-IH-1518 & WC Docket No. 07-52, ¶52 (rel. Aug. 20, 2008) (“Comcast Order”). 8 Comcast Order, ¶ 47. 9 As discussed further herein, while the ARRA only calls for NTIA to consider application of the Broadband Policy Statement and additional conditions to the BTOP, the same justifications that drive application of such conditions to the BTOP apply with equal force to the RUS programs funded through the ARRA. A/72918240.2 4
  • Thus, more than simple adherence to the FCC’s Broadband Policy Statement should be required as a condition of any awards. Although the FCC has stated that it is important to avoid “an inflexible framework” that “micromanag[es] providers’ network management practices,”10 NTIA and RUS can and should adopt several additional high- level nondiscrimination and interconnection principles that apply across all publicly- funded networks -- regardless of underlying technology -- to protect vulnerable users of these networks in unserved and underserved areas. Specifically, NTIA and RUS should provide guidance on what constitutes “reasonable network management” of taxpayer- funded networks by establishing several presumptions that will leave award recipients with flexibility to manage these networks while also putting them on notice as to the parameters of proper conduct: (1) Establish a rebuttable presumption that network management that results in the blocking or material (i.e., perceptible to the end user) degradation of a service or application that competes with a service or application offered by the network operator (or its affiliate) is unreasonable; (2) Establish a rebuttable presumption that network management that results in the blocking or material (i.e., perceptible to the end user) degradation of interconnected Voice over Internet Protocol (“VoIP”) or any other service or application that is subject to 911 and E911 obligations is unreasonable; and (3) Presume that is not reasonable network management to fail to disclose to customers any practice or circumstance that could result in a broadband service being provided at speeds less than those advertised for that service. Moreover, NTIA and RUS should require that each applicant commit in its application(s) to comply with a protocol-agnostic network and congestion management policy.11 Within 45 days of any award, the recipient should be required to file with the 10 Comcast Order, ¶ 50. 11 See id., ¶ 54. A/72918240.2 5
  • awarding agency and the FCC the details of the protocol-agnostic network and congestion management practices that it will employ with respect to the publicly-funded network, including the limits it will apply to any customer’s use of bandwidth, a compliance plan, and copies of the notices and other disclosures that it will provide to customers with respect to network management. Finally, NTIA and RUS should promote consumer choice and use of innovative applications and services atop these networks built through taxpayer funds by requiring that award recipients effectively offer broadband service on a standalone retail basis. As described further herein, such a condition should impose no development cost or other significant burden on any network operator, but would simply ensure that a consumer who wanted to purchase a broadband service -- and only a broadband service -- from that network operator could do so at a reasonable rate that does not effectively compel the purchase of accompanying services (such as telephone or cable television). II.THE INTERNET HAS DRIVEN TREMENDOUS ECONOMIC GROWTH AND JOB CREATION -- AND NTIA SHOULD IMPOSE CONDITIONS TO ENSURE THAT THESE POSITIVE DEVELOPMENTS ARE REALIZED AND SUSTAINED ON TAXPAYER-FUNDED NETWORKS. A. The Openness of the Internet Has Been Critical in Driving Economic Growth and Creating Jobs. The FCC’s Broadband Policy Statement recognized the significant role that an open Internet plays in the American economy and culture, noting the fact that it has served “as an engine for productivity growth and cost savings,” its “profound impact on American life,” and its provision of “a forum for a true diversity of political discourse, unique opportunities for cultural development, and myriad avenues for intellectual A/72918240.2 6
  • activity.”12 Numerous scholars echo the FCC’s conclusions, documenting billions of dollars of cost savings and dramatic increases in productivity resulting from adoption of the Internet and related technology,13 and explaining that “[n]o modern phenomenon better demonstrates the importance of free resources to innovation and creativity than the Internet.”14 Indeed, because of the open and free nature of the Internet, the barriers to entry for an entrepreneur or content creator are low, and the Internet provides innovators with an unparalleled opportunity to distribute ideas and products far and wide at little expense.15 The diversity and dynamism of content, services, and applications available over the Internet today are direct by-products resulting from, and clear manifestations of, the benefits associated with an open Internet. These factors highlight the importance of ensuring that this platform remains open to all -- particularly on networks that are largely paid for by all. Likewise, the openness of the Internet has been and remains a significant driver of job growth. One study has estimated that a seven percentage point increase in 12 Broadband Policy Statement, ¶ 1. 13 Hal Varian et al., The Net Impact Study (Jan. 2002), available at: http://www.netimpactstudy.com/nis_2002.html; see also Robert Crandall et al., The Effects of Broadband Deployment on Output and Employment: A Cross-Sectional Analysis of U.S. Data, The Brookings Institution (July 2007) (finding that “for every one percentage point increase in broadband penetration in a state, employment is predicted to increase by 0.2 to 0.3 percent per year”), available at: http://www.brookings.edu/~/media/Files/rc/reports/2007/06labor_crandall/200706litan.pdf; Bill D. Herman, Opening Bottlenecks: On Behalf of Mandated Network Neutrality, 59 Fed. Comm. L.J. 103, 109 (2006) (“As neutral and therefore controlled platforms, both the Internet generally and the Web specifically have spawned a dazzling rate and range of innovation.”) 14 Lawrence Lessig, The Future of Ideas at 14 (First ed., Random House) (2001), available at: http://thefutureofideas.s3.amazonaws.com/lessig_FOI.pdf; see also Yochai Benkler, The Wealth of Networks at 1-2 (2006) (discussing the emergence of a “new information environment” and its potential to “achieve improvements in human development everywhere”). 15 See, e.g., Lawrence Lessig, In Support of Network Neutrality, 3 ISJLP 185, 188 (2007) (“Indeed, if you consider some of the most important innovations in this history of the Internet-from the development of the World Wide Web by a Swiss researcher at CERN, to the first peer-to-peer instant messaging chat service, ICQ, developed by a young Israeli, to the first web based (or HTML-based) email, HoTMaiL, developed by an Indian immigrant – these are all innovations by kids or non-Americans, outsiders to the network owners.”). A/72918240.2 7
  • broadband adoption could result in, among other things, 2.4 million jobs created or saved annually, as well as over $35 billion per year in hours saved from accessing broadband at home.16 Although the focus and the immediate stimulative effect of the government broadband programs may likely come in the form of network construction and operation employment, the broader and longer-term impacts of broadband deployment on job creation cannot be overlooked. 17 Indeed, another study indicates that good-paying jobs in the manufacturing and services industries, “especially finance, education, and health care,” are positively affected by broadband penetration.18 A 2007 study prepared for AT&T similarly found that just a moderate increase in broadband use over a ten-year period “could generate a cumulative gain of 1.8 million jobs and $132 billion of payroll in California relative to the baseline forecast of economic growth.”19 At the same time, one must also consider what kind of Internet will give rise to such positive results. None of the studies cited above appears to anticipate changes toward a more closed Internet operating environment, where a monopoly network provider in a given serving area can “network management” to limit certain applications or services and favor others. If network providers can control or favor access to certain applications or content under the guise of “network management,” this promise would be significantly impaired, if not defeated. It is therefore critical to ensure that these new 16 The Economic Impact of Stimulating Broadband Nationally, Connected Nation, Inc. (Feb. 21, 2008), at 7. 17 See, e.g., The Effects of Broadband Deployment on Output and Employment: A Cross- Sectional Analysis of U.S. Data, Robert Crandall, William Lehr, & Robert Litan, Issues in Economic Policy: The Brookings Institution, No. 6 (July 2007), at 1 (“[F]or every one percentage point increase in broadband penetration in a state, employment is projected to increase by 0.2 to 0.3 percent per year.”) 18 Id. 19 Economic Effects of Increased Broadband Use in California, Dr. Kristin Van Gaasbeck, Dr. Stephen Perez, Ryan Sharp, Helen Schaubmeyer, Angela Owens, & Lindsay Cox, Sacramento Regional Research Institute (Nov. 2007), at 30. A/72918240.2 8
  • publicly-funded networks -- which will reach those least likely to have any other choices for broadband access -- are not given latitude to “manage” the network in a way that could limit consumer choice, have the paradoxical effect of driving down adoption rates,20 and ultimately undermine the broader economic benefits that could result from broadband deployment. B. VoIP Providers are Expected to Support Significant Job Growth and Consumer Cost Savings, and VoIP Services are Critical Broadband Applications. VoIP providers have been projected to be among the top job creators over the next several years.21 A leading business research firm has likewise listed VoIP services at the top of those industries it expects to provide “hot jobs,” estimating that average annualized job growth in this industry will exceed 19% and that average annualized wage growth through 2012 is estimated to be over 21%.22 Indeed, the rate of job and wage growth for VoIP services far outpaced other job categories on the list. For example, wage growth in VoIP services are expected to outperform the second best job category by almost four times.23 The consumer cost savings from VoIP cannot be understated. It is estimated that “over-the-top” VoIP providers, of which Vonage is far and away the largest, will 20 An ironic fact is that those network providers who receive funds to build their systems in areas where they never planned otherwise to go and where no other network exists may be least troubled by low adoption rates. Given that there is no other network to which consumers could turn, these providers may be far more encouraged by the profits obtained from their own or their affiliates’ content, applications, and services than they are troubled by a few percentage points drop in broadband adoption. 21 Report: VoIP the Place to be For Jobs, Money, Triangle Business Journal, Report (Apr. 2, 2008), available at: http://www.bizjournals.com/triangle/stories/2008/03/31/daily21.html. 22 Id. 23 See id. A/72918240.2 9
  • directly save consumers $6 billion over the next five years.24 Further, it estimated that competition by VoIP and other services will create $111 billion in total savings for consumers in the next five years.25 These savings, however, are not simply a reflection of the price differences between VoIP and traditional wireline telephony services. A large portion of these savings, approximately $87 billion, will instead come from the competitive response of traditional wireline service providers to increased competition by alternative services.26 These savings are particularly important to consumers now when they are being squeezed by falling home prices, falling stock prices, and widespread job losses--problems that the ARRA is intended to help rectify. C. Failure to Adopt Conditions As Part of ARRA Funding Introduces Significant Perils and Runs the Risk of Lost Opportunities. Funding under the ARRA for broadband deployment in rural, unserved, and underserved areas alone cannot guarantee sustained economic growth or job creation. While these programs may create some short-term jobs in the form of network construction and some longer-term jobs in the form of network operation, the agencies must also focus on the real payback of these networks that will be built through the ARRA -- their long-term benefits to society in terms of economic development and job creation. As discussed above, however, these long-term benefits are unlikely to be achieved if a single provider can throttle or favor certain kinds of traffic, services, and 24 See Consumer Benefits from Cable-Telco Competition, MiCRA, at 15-16 (Nov. 2007), available at: http://www.micradc.com/news/publications/pdfs/Updated_MiCRA_Report_FINAL.pdf (providing economic analysis of the savings to residential consumers of new and emerging technologies, including VoIP). 25 Id., at 27. 26 Id. A/72918240.2 10
  • applications -- particularly in the markets that will be served by the ARRA, where there will be little, if any, alternative for broadband services for the affected customers. Congress recognized that adherence to the FCC’s Broadband Policy Statement is a necessary floor to ensure that these publicly-funded networks remain open, and that consumers in these communities enjoy the same access to content, application, and services as consumers in areas where broadband services are more widely available. Through the Comcast Order, the FCC has already declared that the Broadband Policy Statement is an important baseline by which to hold network providers accountable for anti-competitive behavior.27 Such a basic requirement provides a good start, but as Congress sensed in treating the Broadband Policy Statement as a floor, additional measures -- such as nondiscrimination standards and a framework to enforce those standards -- are necessary to ensure that the program creates sustainable economic growth and employment opportunities. III.IN ADDITION TO THE BROADBAND POLICY STATEMENT, NTIA AND RUS SHOULD PROVIDE HIGH LEVEL GUIDANCE ON NETWORK MANAGEMENT AND REQUIRE AWARD RECIPIENTS TO “EFFECTIVELY” OFFER STANDALONE BROADBAND. A. NTIA and RUS Should Provide High Level Guidance on “Reasonable Network Management.” Vonage recognizes the tension that exists when policymakers attempt to define “reasonable network management” too closely. Rules that are too specific and prescriptive may not be flexible enough to allow for evolving network management techniques that might foster development and innovation, and could discourage actions by network operators that might benefit consumers. They may also not easily apply 27 See Comcast Order, ¶ 39. A/72918240.2 11
  • across different technology platforms. At the same time, however, uncertainty over what constitutes “reasonable network management” could discourage investment by creators of applications and services because they cannot be sure whether network operators will “manage” them out of existence. The potential for anti-competitive network management (or practices that are otherwise not in the public interest) by network operators is likely to be much greater under the ARRA programs than under “typical” market conditions. Because the ARRA programs are designed to expand broadband access where there is little or no competition among broadband providers, the market cannot self-regulate against anti- competitive or anti-consumer business practices. Thus, even assuming arguendo that the Broadband Policy Statement suffices for purposes of “normal” network operations in areas where there are multiple choices for broadband services -- a point that Vonage does not concede -- it certainly will not suffice to “preserve and promote the open and interconnected nature of the public Internet” in those areas where there is a network monopoly. And it is simply unacceptable to have the taxpayers fund such a monopoly without reasonable conditions. By setting high level guidance, NTIA and RUS can go a long way toward ensuring that government funding will not be used to perpetuate conduct that diminishes competition, limits innovation, and harms consumers. To stem anti-competitive “network management” practices before they occur in a “market” that is otherwise ripe for them, NTIA and RUS should establish a rebuttable presumption that network management that results in the blocking or material degradation of a service or application that competes with a service offered by the network operator (or its affiliate) A/72918240.2 12
  • is not reasonable.28 Blocking or degrading an application or service that competes with those products or services provided by the network operator or an affiliate is, by definition, anti-competitive.29 Further, to restrain conduct that could endanger public safety, NTIA and RUS should likewise establish a rebuttable presumption that network management practices that result in the blocking or material degradation of interconnected VoIP services or any other IP-enabled service or application that is subject to FCC or local 911 and/or enhanced 911 (“E911”) obligations is not reasonable. Blocking or degrading a 911 or E911-capable service is dangerous for consumers, and network operators should face the very highest of bars to justify such conduct.30 In addition, NTIA and RUS should require that each applicant commit in its application(s), as an express contractual condition of any award, to comply with a protocol-agnostic network and congestion management policy.31 Within 45 days of any award, the recipient should be required to file with the awarding agency and the FCC: (1) the details of the protocol-agnostic network and congestion management practices that it will employ with respect to the publicly-funded network, including the limits it will apply to any customer’s use of bandwidth; (2) a compliance plan that describes precisely how the recipient will ensure that such practices are in fact applied to that publicly-funded network; and (3) copies of the notices and other disclosures that it will provide to customers on that network indicating the circumstances under which 28 For purposes of these conditions, “material degradation” should be defined as any impact on a service, application, product, or content delivery arising out of a “network management” practice where such impact is noticeable to the end user. 29 See, e.g., Madison River Communications, LLC and affiliated companies, Order, File No. EB-05-IH-0110, Acct. No. 200532080126, FRN: 0004334082 (rel. Mar. 3, 2005) (fining Madison River for blocking Vonage VoIP traffic). 30 Id. 31 See Comcast Order, ¶ 54. A/72918240.2 13
  • bandwidth may not equal advertised speeds.32 With respect to this last point regarding customer communications, such disclosures should be required in a clear and conspicuous customer notification, and not merely tucked into “fine print” on a website that is available several links deep from an operator’s home page. Consumers must also be provided clear and conspicuous notice of changes to such disclosures, rather than being presumed to have read website updates that were made in the dark of night. Failure to comply with any of the foregoing should likewise be presumed to be an unreasonable network management practice.33 The high-level guidance that Vonage outlines is fair, pro-competitive, promotes public safety, and would provide both network operators and content, application, and service providers additional clarity on what constitutes unreasonable network management. This guidance could apply easily across various technology platforms -- and it is important that whatever conditions are adopted are built to do so. 34 It would place little burden on network operators, other than being prepared to publish their 32 See id. 33 Although the ARRA mentions the Broadband Policy Statement and the potential imposition of additional contractual conditions only with respect to the BTOP, the same conditions should apply with equal force to those networks built through use of RUS funds for reasons explained in Section IV hereof. 34 Recent problems associated with end user access to Skype services through the AT&T/Apple iPhone only reinforce the need to apply clear and unmistakable broadband policies across all technology platforms. See Letter from Ben Scott, Policy Director, and Chris Riley, Policy Counsel, Free Press, to Acting Chairman Michael J. Copps, FCC, WC Docket No. 07-52, dated April 3, 2009;see also Inquiry Concerns High-Speed Access to the Internet Over Cable and Other Facilities, Internet Over Cable Declaratory Ruling, Appropriate Regulatory Treatment for Broadband Access to the Internet Over Cable Facilities, GN Docket No. 00-185, CS Docket No. 02-52, Declaratory Ruling and Notice of Proposed Rulemaking, 17 FCC Rcd 4798 (2002), ¶ 73 (discussing the need to adopt consistent policies for “development and deployment of multiple platforms” under Section 230 of the Communications Act and Section 706 of the Telecommunications Act of 1996) and Appropriate Regulatory Treatment for Broadband Access to the Internet Over Wireless Networks, WT Docket No. 07-53, Declaratory Ruling, 22 FCC Rcd 5901 (2007), ¶ 55 (discussing the need for “regulatory parity among all broadband Internet access services -- regardless of whether they are offered through wireline, cable, or wireless technology”). A/72918240.2 14
  • network management practices in the light of day and to ensure that they treat no packet of traffic different than any other packet -- absent sufficient justification to overcome the presumption that such differentiation is unreasonable. Such guidance would not impose prescriptive regulations, would leave network operators substantial latitude to operate these networks, and would be flexible enough to address multiple technology platforms and evolving technologies. In the end, these high level principles simply ensure that those networks paid for by all can be used by all without fear of arbitrary or anticompetitive limitations. B. Award Recipients Should Be Obligated to “Effectively” Offer Stand Alone Broadband Service As a further condition, NTIA and RUS should require award recipients to offer broadband services on these publicly-funded networks on a standalone basis (i.e., without tether to other services such as telephone or television). A standalone broadband obligation is reasonable given that these broadband services could not have been offered by the network operator but for ARRA funding. Moreover, such an obligation is particularly appropriate in light of the areas targeted for ARRA support. Many consumers in areas that have multiple broadband providers have the option of obtaining standalone broadband service from incumbent telecommunications service providers, major cable providers, or through competitive carriers and/or ISPs. 35 As the FCC has found, the availability of standalone broadband service leads to significant benefits to consumers from competition in the market for voice services.36 35 See High-Speed Services for Internet Access: Status as of December 31, 2007, Industry Analysis and Technology Division, Wireline Competition Bureau, FCC, at Table 16 (Jan. 2009). 36 Verizon Communications Inc. and MCI, Inc. Applications for Approval of Transfer of Control, Memorandum Opinion and Order, WC Docket No. 05-75, n.320 (rel. Nov. 17, 2005) (finding that Verizon’s commitment to offer stand-alone DSL broadband service as a condition of its merger with MCI to be in the public interest); see also SBC Communications Inc. and AT&T Corp. Applications for Approval of Transfer A/72918240.2 15
  • On the other hand, the practice of “tying” broadband service to other services is anticompetitive, and should be prohibited by NTIA and RUS as a condition of funding broadband deployment projects. Broadband tying is anticompetitive because it prevents customers from porting their numbers, and essentially forces them to purchase local services they do not want – either because they have a wireless option or because they prefer to use VoIP alternatives. The net effect is to act as a drag on the adoption of broadband and new IP technologies by making services like those offered by Vonage economically unattractive. It is particular pernicious in the kinds of areas targeted by the ARRA programs, where the customer presumably has few, if any, other options for broadband service -- without a standalone broadband obligation, ARRA funding could have the unintended consequence of skewing cable or telephone competition by enabling one (and only one) provider to offer a bundle, thereby picking a “winner” among the service providers there who previously could offer only telephone and/or television. Standalone broadband service allows over-the-top VoIP providers to compete with traditional voice providers for customer’s primary lines. Standalone broadband service also makes it feasible for customers to “cut the cord” and use only wireless service for their voice calling needs. As discussed above, competition between over- the-top VoIP providers and traditional voice providers has resulted in significant direct and indirect cost savings for consumers. Cutting the cord has also likely resulting in substantial cost savings for consumers. Because the ARRA programs will fund broadband network construction where there is little or no competition between of Control, Memorandum Opinion and Order, WC Docket No. 05-65, n.322 (rel. Nov. 17, 2005) (same). A/72918240.2 16
  • broadband providers, the only way to ensure that consumers in unserved and underserved areas enjoy the same benefits from broadband service that consumers in competitive broadband markets enjoy is to require that award recipients offer standalone broadband. An obligation to offer standalone broadband service will be meaningless, however, absent additional measures to ensure that customers can take advantage of that offering. For example, a BTOP grantee could circumvent such a condition and undermine the benefits of standalone broadband by pricing the standalone service at $65/month while pricing bundled broadband and voice service at $70/month. Any rational consumer facing such pricing options would almost certainly opt for the bundled service. Thus, to make sure that the ARRA programs do not have an unintended spillover effect on competition in the telephone and television markets, and to ensure that a standalone broadband obligation has real teeth, NTIA and RUS should mandate that standalone broadband be “effectively” provided to consumers served through publicly-funded networks. One way to ensure that standalone broadband service is “effectively” provided to consumers would be to require award recipients to price standalone broadband offerings on their publicly-funded networks at a rate comparable to their standalone broadband services in competitive areas. If a particular award recipient does not offer standalone broadband elsewhere, an alternative rule would be to mandate pricing comparable to standalone broadband offerings from other providers in competitive areas in the nearest applicable jurisdictions. Similarly, making it difficult for customers to obtain standalone broadband service, discouraging them from taking such service, or A/72918240.2 17
  • providing false information about standalone broadband service would not be “effectively” providing standalone broadband. Award recipients should also be required to post clearly and conspicuously the rates and terms of their standalone service offerings on their websites and/or in other public fora to ensure that consumers are adequately notified of the price of such services. Finally, any claims that creating such a standalone offering would be burdensome are red herrings. It should require no additional systems deployment or investment simply to make an existing service available for a reasonable standalone rate rather than only as part of a bundle or at an unreasonably high standalone price -- in the end, this is nothing more than a pricing change (or in some limited cases perhaps, a new product introduction). This being said, for those who may claim that some systems development work would be necessary to comply with this condition or that they should not be required to develop such an offering if no demand exists, Vonage recommends that NTIA and RUS allow a grant recipient to delay offering an effective standalone product until 30 days after bona fide request from another provider or end user customer. Even though Vonage doubts that any significant effort would be necessary to comply with this grant condition, this additional measure would ensure that the grant recipient need expend no effort whatsoever with respect to this grant condition until customer demand exists. C. The Conditions Should Apply for the Useable Life of the Network. Any non-discrimination or interconnection obligations established through an ARRA award should attach for the useable life of the infrastructure created from that award. But for the public financing of the network infrastructure, the award recipient A/72918240.2 18
  • would not have otherwise undertaken the broadband project under the terms of the ARRA.37 Because the public is financing the infrastructure, it is reasonable to hold award recipients (and any future purchasers or assignees) to the public interest non- discrimination and interconnection obligations established through the funding program. IV.NTIA AND RUS NEED TO ESTABLISH AN ENFORCEMENT FRAMEWORK FOR THE NONDISCRIMINATION AND NETWORK INTERCONNECTION OBLIGATIONS. As noted above, nondiscrimination and interconnection obligations are necessary to ensure that ARRA funding does not adversely affect competition or harm consumers. However, having nondiscrimination and interconnection obligations is meaningless without a reasonable method for aggrieved parties to seek enforcement of these obligations and to have those grievances addressed in a timely fashion. To this end, Vonage recommends that NTIA and RUS, as part of the requisite consultation with the FCC, adopt an enforcement framework that leverages the FCC’s demonstrated expertise and capabilities in this regard together with the ability of the NTIA and RUS to impose contractual conditions on awards. First, using a roadmap provided by the FCC’s Comcast Order, NTIA and RUS should require as an express condition of any award that the recipient -- regardless of corporate or license status, type of network deployment, or type of broadband services offered -- consent and waive all objections to enforcement at and by the FCC with respect to all nondiscrimination and network interconnection obligations imposed as substantive contractual conditions of the award. This enforcement could come in the form of disputes raised (either formal or informal complaints) by affected parties or 37 See ARRA, § 6001(e)(3). A/72918240.2 19
  • through investigation by the FCC. The FCC’s Enforcement Bureau is well-equipped to handle such matters, as it has ready-made vehicles at its disposal for dispute resolution between private parties and the conduct of investigations. Moreover, the FCC is the expert agency with respect to policy and technical matters relating to broadband services (particularly as they apply across different technologies), and has previously demonstrated just such expertise in the context of deciding whether Comcast’s network management practices were “reasonable” in the context of the Comcast Order. Given that any future dispute or investigation will require consideration of similar issues as to whether a particular network management practice violates the Broadband Policy Statement and/or is otherwise “reasonable” under the presumptions outlined herein, it makes sense for the FCC to handle the resolution or investigation of such disputes. The jurisdiction of NTIA and RUS to require such conditions and the FCC to enforce them is clear, and both agencies are well-versed in the practice of crafting conditions as necessary to serve particular program purposes. With respect to NTIA, the ARRA states that the Broadband Policy Statement is but a floor, leaving the agency discretion to adopt additional conditions as necessary to serve the purposes of BTOP. 38 Indeed, the NTIA is familiar with imposing detailed conditions in the context of specific programs. For example, in its Public Telecommunications Facilities Program, NTIA placed certain restrictions on the kinds of equipment and supplies that could be procured through NTIA funds, limited grantees’ ability to reconfigure their facilities, and prohibited certain kinds of advertising activities; the agency also required that each 38 ARRA, § 6001(j). A/72918240.2 20
  • grantee provide a perfected lien on the equipment obtained through use of program funds.39 With respect to RUS, although the ARRA does not require that certain network management principles apply to its programs, the Broadband Policy Statement would apply to networks built under RUS programs as a general matter,40 and the application of further conditions with respect to reasonable network management is well within and consistent with the exercise of RUS authority as evidenced by other conditions it has adopted in its prior programs. For example, the “Community Connect” broadband grant program under the RUS, which is designed to encourage broadband deployment to certain rural communities, has several funding conditions including: (1) recipients are required to provide broadband services free of charge to certain delineated public institutions and community centers for a certain amount of time; and (2) prohibitions on incumbent carriers from providing certain types of services using publicly-funded infrastructure.41 With respect to the authority of the FCC, the ARRA contemplates that the FCC coordination and expertise with respect to broadband services is necessary for these programs to succeed,42 and the Comcast Order establishes that the FCC has jurisdiction in numerous respects to decide on a case-by-case basis whether a particular entity has violated federal broadband policies.43 And, of course, these 39 See 15 C.F.R. §§ 2301.1, 2301.7, 2301.19, and 2301.22. 40 See Comcast Order, ¶ 13 (discussing the FCC’s intent to apply the Broadband Policy Statement to “providers of telecommunications for Internet access or IP-enabled services”) (citations omitted). 41 See 7 C.F.R. §§ 1739.11(e) & 1739.13(b). 42 See ARRA, § 6001(j). 43 See Comcast Order, ¶¶ 15-16 (identifying 47 U.S.C. §§ 151, 154, 157 nt, 201, 230, 256, 257, 303, and 601 as sections within the FCC’s statutory purview that allow it to take jurisdiction over and A/72918240.2 21
  • conditions are contractual and would be well-publicized. If a party does not want to adhere to them with respect to the network it wants to build through use of taxpayer funds, that party simply need not apply or accept an award -- and any party accepting an award would have more than adequate notice (and, indeed, will have given affirmative consent to the fact) that any disputes over network management practices would be subject to FCC enforcement. Finally, Vonage does not believe the public interest would be served by deobligating funds for those who violate these conditions. This is not to understate the importance of the conditions, but Vonage acknowledges the critical importance and overriding objective of expanding broadband. Under these circumstances in these markets, it would be far better to sanction (e.g., fine) the network operator and order compliance with the conditions than to “pull the plug” on funding and deny broadband access to tens or even hundreds of thousands of consumers. V.CONCLUSION The programs to be established under the ARRA represent a significant opportunity to expand and enhance the nation’s broadband infrastructure and to promote the adoption of broadband services by new customers. But the true promise of these programs can only be realized by ensuring that consumers will have a full and free chance to access the Internet without being impaired by policies and practices that favor particular types of content, applications, programs, or services. To this end, NTIA should adopt clear but flexible conditions and obligations as described herein to ensure act with respect to unreasonable network management practices affecting Internet-related services); see also id., ¶ 28 (noting that agencies have “wide berth” to conduct their proceedings), ¶ 32 (stating that a “case-by-case” approach to adjudicating Internet-related disputes is appropriate), and ¶¶ 17-21 and 38 (finding that the FCC’s ancillary authority empowers it to address such disputes through adjudication). A/72918240.2 22
  • no more than truly “reasonable network management” and protocol-agnostic policies are applied to any networks built using NTIA- or RUS-supplied taxpayer funds. NTIA and RUS should also require award recipients to make an effective standalone retail broadband offering available over those networks, and should provide that aggrieved parties can seek enforcement of all such conditions and obligations at and by the FCC. Respectfully submitted, /s/ Brendan Kasper Senior Regulatory Counsel Vonage Holdings Corp. 23 Main Street Holmdel, New Jersey 07733 (732) 444-2216 A/72918240.2 23