1. Federal Broadband Policy:
Impact on Minnesota
Minnesota Broadband Summit
Phillip Brown
Connected Nation
pbrown@connectednation.org
November 14, 2012

2. Broadband in Minnesota
• 28% of Minnesotans do not subscribe to broadband
• More than half of low-income households with children have not
adopted
• 79% of low-income seniors have not adopted
• 40,000 Minnesota businesses do not subscribe to broadband
“No country, however rich, can afford the waste of
its human resources.”
Franklin Delano Roosevelt

3. National Broadband Policy is shifting
towards a multi-faceted approach that
encompasses
ACCESS, ADOPTION, and USE
• The federal ACCESS subsidy system is changing dramatically
• Broadband ADOPTION has stalled – with profound impact upon the
economy and opportunity
• USE of broadband by many businesses and institutions is improving – but
more needs to be done to improve connectivity options and use by
schools, libraries, health care institutions
2011 © Connect Minnesota ® All Rights Reserved. Do Not Copy Without Written Permission.

4. Federal Policy Areas
• Universal Service Policy – the Connect America
Fund
• Public Safety
• Infrastructure Policy
• Affordability and adoption initiatives

5. The Federal Universal Service Fund
$8.2 Billion Annually to Meet Four Objectives
E-Rate Financed through approx. 15%
$2.23B
Over 31,000 telecommunications service
Applicants consumer fee
Rural Health
Care
$81.5M Current high-cost
3,000 Health High Cost subsidies aimed at
Care $4.03B providing voice service
Providers 1,900 Eligible ubiquitously at
Telecommunic relatively uniform and
Low Income ations
$1.75B affordable rates
Carriers
13.7M Low
Income
Households
For information on current USF programs www.usac.org 5

6. The USF in Minnesota (2011)
$98.9 million for
Minnesota providers network
collected $134.7 million deployment to
high-cost areas
in 2011
$5.9 million in
Minnesota consumers discounts for
and businesses basic telephone
service for low-
contribute $130.2 million income persons
per year – a net gain to
state of $4.5 million
$26.7 million in
subsidies to
connect schools
and libraries
$3.2 million in
subsidies for rural
health care
communications

7. Connect America Fund Transition
• 2010: National Broadband Plan calls for an overhaul of USF High Cost Program
transitioning subsidies to directly support broadband service
• 2011: FCC Order Transitions High-Cost Program from subsidies to dial-up in remote
areas to “Connect America Fund”
– Transition to subsidize provision of 4 Mbps down/1 Mbps up fixed broadband service in
“unserved” areas
– Creates a Mobility Fund to subsidize mobile broadband, while transitions out CETC funds
– Creates a Remote Areas Fund to subsidize broadband in extremely remote areas (likely
applicable only in states such as Alaska)
• 2012: Phase I
– Begin phase-out of duplicative subsidies
– Focused on areas where one-time capital injection can spur deployment
– $300 million in Mobility Fund allocated
– $115 of budgeted $300 million in fixed wireline subsidies allocated among larger carriers
• 2013: start transition to Phase II (ongoing support and competitive
bidding)
7

8. Three Transitional Phases
• Phase I – 2012 – $600 Million One-Time Capital Injection
• CAF – Phase I: $300M one-time capital injection to expand broadband across for price cap
territories (Large ILECs: AT&T, CenturyLink, Frontier, Verizon, etc.)
• Mobility Fund-Phase I: $300M one-time capital injection to expand mobile broadband across
unserved areas
• Phase II – 2013 – 2015 – Annual Recurring Subsidy Disbursements
• CAF – Phase II:
– $1.8B in funds to build broadband in all unserved areas of a price cap carrier’s territory across a
state
• $2B in funds to build broadband across unserved areas served by rate-of-return carriers
• Mobility Fund – Phase II: $500M annual recurring capital injection
• Post Phase II - All subsidies determined by competitive mechanism
• CN Policy Brief:
http://www.connectednation.org/sites/default/files/bb_pp/connected_nation_usf_reform_cover_memo_and_table.pdf
8

9. Universal Service Mindset Changes
• Broadband mapping information and ongoing tracking/reporting will be
used to target subsidies efficiently
• Phased and targeted approach, designed to build infrastructure quickly
• Program will be on strict budget and will eliminate duplicative subsidies
• Subsidies will eventually shift to competitive bidding (immediately for
mobile, eventually for fixed networks)
• Providers will not receive subsidy to provide service in an area in which
broadband and voice are available from an “unsubsidized competitor”
• Rural carriers immediately required to provide 4 Mbps down/1 Mbps up
upon “reasonable request” as condition of receiving current voice
subsidies
2011 © Connect Minnesota ® All Rights Reserved. Do Not Copy Without Written Permission.

10. Current Status
• CAF – Phase I
– A $115M in subsidies has been accepted by price cap carriers in 37 states
• http://www.fcc.gov/maps/connect-america-fund-caf-phase-i
– CN Policy Brief:
http://www.connectednation.org/sites/default/files/bb_pp/phase_i_connect_america_fu
nd_commitments_7.26.2012.pdf
• Mobility Fund – Phase I
– Reverse auction took place on Sep 2012
• Eligible Areas - http://www.fcc.gov/maps/mobility-fund-phase-1-eligible-areas
• Auction Results (795 bids in 31 states and 83,494 road miles) -
http://apps.fcc.gov/auction901/map/auction_result_ext.html
– CN Policy Brief:
http://www.connectednation.org/sites/default/files/bb_pp/cn_policy_brief_-
_mobility_fund_phase_i_final.pdf
10

11. Potential Minnesota Impact
Connect America Fund Targets in Minnesota
• 13.19% of Minnesota households do not have access to 6
Mbps down/1.5 Mbps up fixed broadband
• 6% of households do not have access to 3 Mbps down/768
kbps up fixed broadband
• 5,456 “road miles” in Minnesota were classified by FCC as
“unserved” by 3G wireless and eligible for subsidy
11

12. Phase I in Minnesota: Mixed Results
• Mobility Fund: No mobile
provider submitted a bid to
serve any unserved area of
Minnesota
• Fixed Broadband Phase I
 CenturyLink accepted $10.9 million
to build out to 14,137 unserved
locations in 21 counties
 4 Mbps down/1 Mbps up
deployment to be completed within
three years
 Only about 4.4% of the homes in
Minnesota without 3/768 service

13. Mobility Fund: Eligible Areas
• Only over 5,000 unserved road miles
in 4285 census blocks – dark blue at
right – were eligible for Phase I
Mobility Fund
• Minnesota Department of
Commerce requested that FCC
expand the list of eligible areas to
include an additional 10,090 census
blocks – light blue — that Connect
Minnesota mapping data indicated
do not have adequate access to 3G
wireless service (1.5 Mbps
down/200 kbps up)

14. Why did no wireless subsidy
bids in Minnesota?
• Limited Areas: Connect Minnesota and Minnesota Department of Commerce identified 2x as
many census blocks without adequate 3G service than FCC declared eligible
• Limited Number of Providers: only four companies were eligible to bid for high-cost wireless
subsidies (T-Mobile, Verion, Tekstar and Hickory Tech)
• T-Mobile did place bids to build out in seven other states, but not Minnesota
– T-Mobile submitted bids for unserved areas in LA, PA, VA, GA, NM, TX and WA
– Average T-Mobile bid: $2,561.22
– T-Mobile submitted bids as high as $39,000 per unserved road mile – a bid for $24,096
to serve Llano, Texas was accepted
– In the end, T-Mobile is receiving $23 million to build-out 3G and 4G to over 10,500 road
miles in VA, NM, TX and WA
• Any Other Possible Explanations?
– Many of the “unserved” areas are in or by National Forests
– Is there adequate availability of sites for tower location and rights of way?
– Access to adequate middle mile infrastructure?
– What can Minnesota do to better attract wireless investment?
2010 © Connect Minnesota ® All Rights Reserved. Do Not Copy Without Written Permission.

15. Next Steps
• CAF – Phase I Round 2: NPRM expected shortly to determine
disbursement mechanism for remaining $185M
• CAF – Phase II
– FCC currently developing cost model to ascertain eligible subsidies in price cap
territories and across areas served by small, rural rate-of-return carriers
– CN Policy Brief: FCC Begins Assessment of CAF Phase II Cost Models
http://www.connectednation.org/sites/default/files/bb_pp/connect_america_fund_phase_ii_cn_policy_bri
ef_final.pdf
• Mobility Fund – Phase II
– Reverse auctions of $500M in funds in 2013
• Eligible Areas for funding based on SBI mapping
data
– Fixed - http://www.fcc.gov/maps/section-706-fixed-broadband-deployment-map
– Mobile - http://www.fcc.gov/maps/section-706-mobile-deployment-map
15

16. Lifeline Reform
– Subsidizes voice service (mobile or fixed) to low income households
• $1.75B in 2011, up from $0.82B in 2008, benefiting 13.7M households
• Funding accrues to provider serving household
2011 Lifeline Disbursement by State (Million)
Minnesota $5.9 Michigan $65.6
Iowa $5.5 North Dakota $2.1
Illinois $67.7 South Dakota $1.3
Wisconsin $20.7 Nebraska $1.6
– 2012 Order reforms Low Income program
– FCC assessing possibility of expanding subsidies to include broadband service
• Low-income broadband adoption pilot program - $25M in funding. Deadline for
application – August 2012
– CN Policy Brief:
http://www.connectednation.org/sites/default/files/bb_pp/usf_lifeline_faqs.pdf
16

17. E-Rate
• Provides discounts to help schools and libraries obtain telecommunications and
Internet services at affordable rates
• $2.23B in 2011, up from $1.76B in 2008, benefiting 31,288 applicants
2011 E-Rate Disbursement by State (Million)
Minnesota $26.7 Michigan $51.1
Iowa $12.9 North Dakota $4.2
Illinois $92.6 South Dakota $2.3
Wisconsin $3.3 Nebraska $9.6
– Learning-on-the-Go: FCC pilot providing $9M to 20 schools to support off-campus
wireless connectivity for mobile learning
– State and regional planners can leverage E-Rate to promote middle-mile network
investments
• Encourage regional and local coordination to aggregate
demand of CAIs
17

18. Infrastructure
 As much as 20% of costs of fiber
construction are related to cost of
pole access, permits, rights-of-
way, and related charges
 More than half of the cost of
trenching fiber can be shared or
avoided through “dig once,” open-
trenching, or conduit policies
 Minnesota Broadband Task Force
has appropriately focused on this issue –
Many of these often-
and federal policy is shifting
hidden infrastructure
costs can have
disproportionate impact
in rural areas

19. Infrastructure: Policy Response
 Middle Class Tax Relief and Job Creation Act of 2012
 Requires common federal land permitting form for broadband
 Requires a “direct cost recovery” fee for federal permits for broadband
 Lowers cost and expedite timing of locating and modifying wireless facilities
 Should have an impact on National Forests in Minnesota’s North
• June 14, 2012 White House Executive Order 13616
• Significant changes to federal rights-of-way policies, as called for by National
Broadband Plan
• Implements “dig once” policy of installing underground fiber conduit along
federally-funded highway where appropriate
• Requires every federal agency (including Interior) to “develop and implement a
strategy to facilitate the timely and efficient deployment of broadband facilities
on Federal lands, buildings and rights of way

20. Public Safety Broadband
• Nation’s lack of an interoperable wireless network for
first responders was highlighted by the 9/11
Commission Report – and spectrum has been reserved
since 1997 for this purpose!
• Middle Class Tax Relief and Job Creation Act of 2012
created and funded the First Responder Network
Authority (“FirstNet”)
• FirstNet’s mandate is to design, build, operate, and
maintain a public safety broadband network that will
have both rural and urban coverage
20

21. Public Safety Broadband
• FirstNet is an opportunity to expand broadband in rural
Minnesota
• FirstNet must leverage existing public and private infrastructure
and can be used to support “secondary users”, which may
include other governmental agencies and the private sector
• Priority mobile service to Public Safety community, but
network can be leveraged by secondary users: Commercial
operators, Community Anchor Institutions, state and local
government
• Coordination with state and local authorities essential
• Essential to leverage SBI broadband maps and regional planning
efforts to expand broadband
21

22. Public Safety Broadband
CN Policy Briefs:
SEP 28, 2012 -
http://www.connectednation.org/sites/default/files/bb_pp/cn_
policy_brief_-_firstnet_board_meeting_09252012_final.pdf
AUG 23,2012 -
http://www.connectednation.org/sites/default/files/bb_pp/cn_
policy_brief_-_firstnet_notice_web_version_082012.pdf
For more information:
http://www.ntia.doc.gov/category/public-safety
http://dps.mn.gov/divisions/ecn/programs/armer/Pages/studie
s-reports.aspx
22

23. What is FirstNet?
FirstNet is…
 A federal agency “administered by” the U.S. Department of Commerce
 An independent Board of 15 members – three statutory federal members
(DHS, DOJ, OMB) and 12 appointed from the state, local, public safety, and
industry community
 An exclusive wireless license holder of the public safety broadband license
 A wireless network operator with a budget of $7 billion that will build a
nationwide wireless network and sell service to public safety agencies
 A regulated firm that will have to meet substantial rural deployment
milestones, leverage existing commercial infrastracture “to the maximum
extent economically desirable”, ensure interoperability of equipment and
services, and be subject to regulation of the price of its services by the
Department of Commerce
23

24. FirstNet’s Challenge
• Minnesota Department of Public Safety estimates that building a
public safety broadband network in Minnesota will cost $185-315
million in capital and have annual operating costs of $14-15 million
• Translated nationally that is a total capital cost of over $16 billion and
annual operating costs over $300 million -- and FirstNet has only a $7
billion budget
• Solution:
– Rely extensively on existing commercial and state infrastructure
to lower costs
– Actively seek out local public/private partnerships that will
hopefully uncover additional users of the network
– Work closely with the state, local and Tribal governments to lower
costs and make FirstNet services attractive
24

25. Role of Regional and State Authorities
– Continue improving accuracy and completion of SBI state broadband maps
– Promote PPPs to expand broadband in unserved & underserved areas leveraging various
CAF programs
– Promote middle-mile network investment by encouraging local and regional CAI demand
aggregation (schools, libraries, public safety, government)
– Coordinate state and regional planning efforts to jointly leverage CAF, Lifeline, E-Rate
FirstNet, BIP and other federal funding sources
• State regulatory agencies
– Help inform stakeholders of funding opportunities at FCC
– Encourage providers to become Eligible Telecommunications Carriers for the funding
under the USF program
– Work with state and local authorities to accelerate private investment
• Streamline construction planning processes and remove barriers to state & local RoW
– State USF program to complement USF and other federal funding opportunities?
25

26. Other Issues
– FCC Contribution Reform
• Request for Comment issued in 2012 to begin process
– FCC Reports and Projects on Broadband Deployment, Speed,
Competiveness
– TV White Spaces
• FCC Order:
http://transition.fcc.gov/Daily_Releases/Daily_Business/2012/db040
5/FCC-12-36A1.pdf
– Spectrum Allocation
– Connect To Compete
• FCC enabled broadband adoption non-profit
• Connected Nation steering partner in effort
• Many partners including Intel, Microsoft, Goodwill, Best Buy, 19
broadband providers, Discovery, Sesame Workshop 26

27. Translating Federal Policy Changes
to Local Opportunities
• Taking advantage of federal policy that is now targeted at
gaps will require targeted local solutions
• State and local Infrastructure policy matters
• Public/Private Partnerships can foster increased adoption and
use, which will lower per-customer cost of deployment
• Local aggregation of demand for broadband can lower risk
and attract investment
Creative and Multifaceted Approaches can
Expand Broadband Availability, Adoption, and
Use in Minnesota
2011 © Connect Minnesota ® All Rights Reserved. Do Not Copy Without Written Permission.