14 Problems with Branstad’s Broadband Bill

Another Broadband bill is being considered by the Iowa House (HSB 104) and the Iowa Senate (SSB 1146) that was proposed by Governor Terry Branstad.

To give you some background on myself, I have been in the telecom field since 1997, and have been a telecom engineer since 2002 when I received my CCNA. In 2009 I left the telecom carrier industry and now currently serve as a telecom analyst in the private sector, utilizing my telecom engineering knowledge to assist my company in maximizing carrier design cost savings and contract efficiencies for their telecom network. I am familiar with all aspects of telecom technology, including telecom network design, provisioning, equipment requirements, LEC (Local Exchange Carrier) & CLEC (Competitive Local Exchange Carrier) tariffs, and contractual as well as regulatory hurdles along with their potential impact long term. I am also a rural City Councilwoman, and serve as our city’s finance committee chair.

Before I get into my more extensive review of the bill, I want to highlight what Governor Branstad’s bill does and does not do.

What it does do:

• Takes $2 million out of the state infrastructure fund to provide competitive grants to private telecom companies
• Takes $3 million out of the state bond repayment fund to provide competitive grants to private telecom companies
• Allows the taxpayer funding of “conduits to nowhere” , where the state will install shell infrastructure in the hopes that someday it may be used to pull fiber for broadband

What it does not do:

• Does not include the wireless, microwave, or satellite providers, who provide the mobile service technology needed to support farms and rural areas
• Does not provide funding for schools to upgrade their technology and infrastructure

• Does not protect local control, as cities and counties will be forced to a 60 day turnaround on permits for these build outs, allowing little time for public review, expert testimony and comments

So while our legislators are debating a gas tax increase to fund necessary infrastructure, they are also considering a bill which steals from both our state debt repayment fund and our state infrastructure fund in order to pick winners and losers – with no guarantee of any bandwidth increase.

In times of tight state budgets, and even tighter personal paychecks, the last thing Iowa taxpayers need to be spending money on is the expansion of the networks of private telecom companies.

Going into further detail I find 14 primary problems with the current broadband bills.

1. Lack of peer reviewed & objective statistical data to corroborate claims made in the Legislative intent of the bill (first section – Legislative Intent)

• There is no source cited that validates claim that broadband development promotes economic development, employment, enhanced access to goods/services, increased educational and training opportunities, faster access to government services or healthcare, and improved overall information and community access
• There is no source cited that indicates that any improvements in the above justify the high cost to taxpayers to fund the build-out of said infrastructure
• The same claims were made in 1995 when we began building the ICN, and its three phase buildout cost of over $192 million. Have any studies been done on this network to determine any positive economic development impact that justified the initial cost & ongoing expense?

2. Bill is limited to only fiber broadband providers, removing alternative broadband access provided by copper (such as Ethernet over copper), wireless, microwave or satellite (Subsection 01, p. 1)

• In rural or mobile situations like crop management (tractors move, fiber does not), fiber to an individual farm is neither practical nor cost effective. Wireless or satellite is less expensive and more conducive to rural areas where there is not as much population density
• A fully meshed, integrated, “all of the above” carrier approach which individualizes broadband delivery based on location will provide greater access to more people, far more quickly & for less cost

3. Defining underserved areas as those that do not have access to 25M upstream/ 3 M downstream would define nearly the entire state of Iowa as an underserved area (Subsection 7A, p. 2)

• How was this bandwidth determined as the floor?
• Since this bill limits grants to either appropriated funds and/or shifted funds ($3 million from the bond repayment fund and $2 million from the infrastructure fund), how will priorities be set in grant awards when the majority of the state is deemed an underserved area?
• This level of access would require huge investments not only in new infrastructure, but in upgrading existing infrastructure, i.e. the “middle mile”. Accounting for these places the average costs of laying fiber up to $100k per mile, or an average of $5k per household. Just using the current census data for Polk County, that would equate to over half a billion dollars.
• The greatest impediment to internet use is end user cost, and even with state assistance the telecom companies would be fronting a huge amount of money for a very slow rate of return. Has there been any consideration that the monthly costs for users will increase as a result of an upgrade of this magnitude utilizing only fiber as an option for broadband (& the only solution eligible for grants), & thereby be a deterrent to use?

4. There are potential regulatory, privacy, security, and corporate law conflicts, as with this bill the state IT office will be in charge coordinating broadband availability and access (Subsection 7A, Section 5, p.2), resolving issues regarding implementation efforts (Subsection 14A, p. 2), & generating generate a report regarding the status of broadband deployment (Subsection 14C.5, p. 3)

• Does this include coordination of private telecom companies as well?
• If so,
  • How will this be done if the entities doing the build out are private regulated telecom companies, which are protected by privacy, proprietary, security & regulatory laws?
  • Will this office be given new regulatory authority similar to the Iowa Utilities Board?
  • Will it have to coordinate with the same?
  • What if there is a conflict between state requirements and/or private enterprise and/or the IUB – who is the final authority?
  • Will there be coordination between the FCC tariff regulations over telecom companies and this office, including new privacy and cyber security regulatory requirements?
  • Who determines & defines “coordinating statewide broadband availability & access”?
  • Since data is required to be collected, to what extent will that be done and what oversight will there be to the metrics and standards to evaluate broadband infrastructure and deployment?
  • Will they have the expertise to resolves conflicts with federal, corporate security and privacy law or will they require this to be decided by the courts at potentially great cost to both private industry and the state, as well as deterring the buildouts themselves?
  • Who will provide accountability for the accuracy of reports generated by this office?
• If not, how will coordinating only state facilities help connect every Iowan if state facilities are given preference in this bill?

5. The state will be overseeing the broadband grant program and telecom companies will be competing for dollars. (Subsection 14B, p.3)

• What assurance does the public have that taxpayer grants will be awarded for projects that benefit individual private users rather than political or medical subdivisions (hospitals, universities, schools, city, county, state) as was in the case of the current ICN? In section 8B11.4 this office sets the rules, which are yet unknown.
• Who determines the methodology, accountability and control of information regarding these awards? Will the private sector have a seat at the table to ensure that there is no bias towards government agencies or a particular industry such as medical?

6. Targeted service areas will determined by reference to broadband availability maps (Section 8B.10, Section 1, p.3)

• Who will be developing the broadband availability maps and providing quantifiable, site verifiable and objective data, as opposed to self-reported, voluntary, unverifiable & subjective data? (current maps rely on verification by end users only)
• What will the map cost be, who will maintain, and how often will they be updated? Will these map vendors be subject to an RFP process?
• There are many variables that can affect map accuracy, so how will the info be gathered?
  • In order to ensure accuracy of these maps, which will be used to judge underserved areas and qualify for taxpayer dollars, telecom companies need to be engaged in their development. However, these same companies are regulated by both the state and the FCC, and may be prevented from providing full network data to a third party due to security and regulatory reasons, or hesitant for a corporate or competitive reason
  • Relying on end user feedback to broadband availability is notoriously inaccurate, as access speeds can often depend on location, number of users, type of user equipment, terminating equipment, software, private network configuration, as well as applications being used.
• There is considerable legal risk using an outside non-technical source to develop maps (such as the federally funded Connect Iowa) where info does not take into account all unknown technical variables that could affect access speeds, and then using this to judge both the access provided by the telecom provider or the targeted service area.

7. This bill only allows for challenges to claims that an area meets the definition of a target area (Section 8B.10, Section 2, p.3)

• They should also be allowed for claims that an area does not

8. This bill allows for a new broadband grant fund program, consisting of both any monies appropriated as well as $5 million shifted from other funds (Section 8B.11, p. 3 & 4 & Section 16, p. 7 & 8)

• $3 million is taken from the bond repayment fund – should we be keeping taxpayers in debt in order to fund this instead?
• $2 million is taken from the infrastructure fund – should we taking money out of infrastructure while at the same time justifying we need to raise the gas tax in order to pay for our roads & bridges?
• Should we be using taxpayer money to benefit one industry, with no development plan in place, and with little return to taxpayers? Considering the buildout cost in Polk County alone, how will this have any impact?
• Fiber buildouts could take years- when will this money be awarded? Before or after completion? If after, grant awards are only encumbered for 2 years – what if the buildout takes longer?

9. The state IT office will lead and coordinate a fiberoptic conduit installation program Section (8B.25, p. 4 & 5)

• Conduit installation is being required with no clear indication of need, as well as no engineered design, planning or funding. It is unwise to pay for and lay conduit that may or may not be used and may or may not have the necessary elements to accommodate future fiber pulls – this is akin to a “conduit to nowhere”.

10. This bill mandates that local governments provide a 60 day turnaround to the broadband permitting process (Section 8B.25, p. 5)

• A required 60 day turnaround interferes with local control
• May encourage flat denials if city or county cannot get answers they need from applicant within 60 days
• Will reduce time necessary for notifications & request for public comment
• May encourage more eminent domain use

11. Amends Section 8D.3, which deals with the Telecommunications and Technology Commission (Sec 12, p. 5)

• Will this commission be overseeing both state and private broadband deployment?
  • If so,
    • 15 of the 17 members are from government agencies with no requirement of telecom network experience. One is a state regulated medical provider. So how will the interests of those outside of government and medicine – business and resident users & telecom companies – be represented and protected?
    • Will they have the same level of regulatory authority over telecom companies as the IUB? What if their decisions made in relation to telecom company requirements conflicts with this regulatory agency, or the FCC? Will a court decision be required to resolve, at great cost to the state, carrier, and ultimately the taxpayer?
    • Will employees from state agencies have the corporate or technical expertise to oversee private telecom enterprise?
  • If not, how will this benefit the private sector?

12. State Chief Information Officer shall develop emergency rules to implement provisions of this act (Section 18, p. 8)

• How is an emergency defined?
• How long will an emergency rule last?
• What limitations to this authority are there?
• What if an emergency rule conflicts with a regulatory one?
• Who will provide oversight to ensure this clause is not abused to the point where it negates all other legislative restrictions in this act?

13. Provides 100% exemption from property taxes for 3 years of actual value of installation of broadband infrastructure (Division III Property Tax Incentives & Assessment, p. 8 – 10)

• May not cover enough of the capital expenditure to make a project worth while
• State mandate impacts local budgets and local control
  • Broadband infrastructure installation may have required local government to provide services to the new site, a capital expenditure paid for by local property taxpayers, for which they will not see a return for 3 years
  • May undo any property tax relief provided in last legislative session due to the missing tax base
• Tax exemption should only apply to state taxes, as this is a state mandate, instead of requiring local property taxpayers to pay for it. Section 23 (p. 12) prohibits state back fill.
• Exemption should not apply retroactively to existing projects, but those scheduled to begin on or after July 1, 2015. This is both fair and protects existing local government budgets
• Exemption should be made based on actual costs, not estimated costs (line 20, part b, & lines 31-35, part e, p. 10)
• Exemption may subject a private company to a state department of revenue assessment of all property in order to determine actual increase in value to qualify. This could expose companies to other potential corporate tax increases by this state using this assessment of value, thereby making them reluctant to apply for the local county exemption, or worse, even do the project.(Section 2 & 3, p. 11 & 12)

14. Change to school infrastructure definition to now include school technology infrastructure (Division IV, p. 13)

• Clarity is needed here, as it seems to apply to one time cap-ex rather than ongoing expenses, which can also be costly
• How does this section assist schools in funding technology improvements, other than allowing them more flexibility in debt financing, tax levies, and the ability to use SAVE revenues (which will eventually end) for new installations?
• How will this prevent property tax increases by schools to install & upgrade their technology/infrastructure?