How the CHIPS Act Took Center Stage of Biden's Re

Jul 07, 2023

When President Biden talks about his economic program, the CHIPS Act is the star of the show.

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The increasingly hostile technology race between the United States and China now revolves around the key to the modern economy: semiconductors. Semiconductors are the microprocessors that power smartphones and washing machines and automobiles. Indeed, these chips are needed in advanced weaponry and artificial intelligence. That places them at the focal point of international tension.

Simply put, semiconductors are the world's new oil.

And, as both President Joe Biden and Commerce Secretary Gina Raimondo have been quick to note, American ingenuity invented the semiconductor. But today, the U.S. currently produces only 12 percent of the world's supply, none of which are the most advanced. This is down from 40 percent in 1990.

The technology and machinery needed to create the most advanced semiconductor chips is so complex and sophisticated that the world's supply is manufactured by only a handful of companies.

Taiwan hosts the world's largest producer, Taiwan Semiconductor Manufacturing Company. It manufactures chips for leading chip design companies, including Apple, Nvidia, Qualcomm and Broadcom. TMSC alone accounts for around 60 percent of the global market for semiconductors, and more than 90 percent of the most advanced ones.

This is especially concerning for America's national security in light of the mounting threat that Taiwan appears to face from its neighbor, the People's Republic of China. The PRC itself hosts almost 300 semiconductor manufacturing plants, and China has launched initiatives of its own to invest in domestic production through the China Integrated Circuit Industry Investment Fund. Established in 2014, this fund was aimed at achieving self-sufficiency for China in the semiconductor industry.

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Lack of assurance regarding the ACP funding discourages local governments and providers from investing into the program.

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WASHINGTON, June 7, 2023 – The uncertainty surrounding the refunding of the Affordable Connectivity Program, which is expected to run out of funds in 2024, has implications for internet service providers, American households, and local governments, said experts at a Broadband Breakfast Live Online event Wednesday.

Uncertainty surrounding the ACP funds has turned private investment into a risky bidding game, said Blair Levin, senior fellow at think tank Brookings Institution's Metropolitan Policy Program. The ACP increases the amount of private capital that providers are willing to invest in new developments in low-income communities because it increases the estimated take rate, he said.

The ACP is currently subsidizing broadband access for more than 17 million Americans with a discount of up to $30 and $75 a month for low-income and tribal households.

Moreover, ISPs are hesitant to market the program to consumers in a way that would suggest sustainability, as they would face a public relations nightmare if the program were to end abruptly, leaving millions of Americans without internet access, said Levin.

The lack of assurance regarding the ACP funding discourages states, local governments and providers from investing time and resources into training staff, added Adeyinka Ogunlegan, vice president of government affairs and policy at advocacy nonprofit EducationSuperHighway.

"Households need assurance now that the money will not disappear," she continued. There is an urgent need to apply pressure to Congress to ensure communities get the certainty they need, she said.

The ACP is the lynchpin that connects all other federal funds, added Director of the Capital Projects Fund at the U.S. Treasury, Joseph Wender. If the fund is not replenished by the end of the year, the cascading effect could compromise the effectiveness of other federal broadband infrastructure programs such as the $42.5 billion Broadband Equity Access and Deployment program and the $10 billion Capital Projects Fund by harming affordability and program take rate.

Wender added that it is crucial to avoid reaching a critical point where providers need to notify subscribers about the program's impending end before renewing the project funds. Consequently, relying on the Universal Service Fund reform to fund the program is not feasible within the limited timeframe.

The USF, funded through a tax on voice service providers, supports four programs that make telephone and broadband services affordable for low-income households, health care providers, and schools and libraries. The fund's sustainability has been under pressure with voice service revenues declining as more Americans use broadband services.

The urgency for ACP renewal cannot be overshadowed by conversations about USF reform, said Ogunlegan.

The ACP program is the "single most important policy issue in telecommunications in terms of impact on the largest number of Americans," said Levin.

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Wednesday, June 7, 2023 – Affordable Connectivity Fund (Special Town Hall Edition)

Since being created at the direction of the Infrastructure Investment and Jobs Act of 2021, the Affordable Connectivity Program has gained significant support across multiple sectors. Smaller internet service providers have said that the ACP provides critical funding for building out networks to rural communities, and digital equity advocates have frequently called the program a key part of closing the digital divide for low-income and minority communities. But the program's success might contribute to its downfall—experts have warned that at the rate people are subscribing, the fund will soon run out of money. This special "town hall" event will address the Affordable Connectivity Fund and the strong desire from many in the broadband world to see it renewed.

Panelists

Blair Levin is a nonresident senior fellow at Brookings Metro and a policy analyst with New Street Research, an equity research firm focused on telecommunications and technology. Levin has also been involved in a number efforts to broaden broadband's reach and effectiveness, including serving as the Executive Director of Gig.U: The Next Generation Network Innovation Project, an initiative of three dozen leading research university communities seeking to support educational and economic development by accelerating the deployment of next generation networks, leading the writing of a report for the World Bank and United Nations High Commission on Refugees on broadband for refugees, and most recently, working with the National Urban League to write the Lewis Latimer Plan for Digital Equity and Inclusion. Previously, Levin worked with the Communications & Society Program with the Aspen Institute Communications and Society Program, following his departure in 2010 from the Federal Communications Commission where he oversaw the development of a National Broadband Plan.

Amina Fazlullah is the Senior Director of Equity Policy in Common Sense‘s D.C. office where she works on a range of issues including expanding affordable access to technology, privacy, platform responsibility, and digital well-being. Prior to joining Common Sense, Amina was a tech policy fellow at Mozilla, where she worked to promote broadband connectivity in underserved communities (tribal, rural, and refugee communities) around the world. She has testified before committees in the U.S. House and Senate on technology issues impacting vulnerable consumers, kids, and families. She has been featured by the press and at conferences on issues related to broadband competition, Section 230, the digital divide, and dark patterns. She has published multiple research reports about the scale, cost, and solutions for addressing the digital divide. She has served on the FCC's Consumer Advisory Committee and currently serves as a founding board member of the National Digital Inclusion Alliance. Amina has also worked with the Benton Foundation, U.S. Public Interest Research Group, for the Honorable Chief Judge James M. Rosenbaum of the U.S. District Court of Minnesota, and at the FCC.

Adeyinka Ogunlegan is the vice president for government affairs and policy at EducationSuperHighway, a national nonprofit with the mission to close the digital divide for the 18 million households that have access to the internet but can't afford to connect. EducationSuperHighway focuses on America's most unconnected communities, where more than 25 percent of people don't have internet. As the leader of the government affairs team, Ogunlegan focuses on developing and executing the nonprofit's policy strategy while bringing together the right coalition of champions to accomplish ESH's mission to close the broadband affordability gap. Prior to joining EducationSuperHighway, she spent several years at Comcast where she was responsible for legislative advocacy and building partnerships with community-based organizations to close the digital divide.

Amol Naik is a government affairs executive and public policy lawyer with deep expertise in technology and infrastructure policy developed at senior levels in both the private sector and government. He is SVP of Public Policy and Community Engagement for Ting Internet, where he leads the national team responsible for all of Ting's public policy advocacy at the federal, state and local levels, as well as evaluating new markets, and subsequently collaborating with communities in the manner required for building citywide fiber to the premises networks. Amol is a civic leader in Atlanta and his interest in digital inclusion comes from his experience growing up in rural North Carolina, where he saw the devastating impact the digital divide can have on underserved communities of color.

Joseph Wender currently serves as director of the U.S. Department of the Treasury's Capital Projects Fund. He previously served for nearly 13 years on Capitol Hill, most recently as Senator Ed Markey's senior policy adviser, where he led a team covering a wide range of issues including telecommunications and infrastructure. Wender also worked as then-Representative Markey's legislative director. Prior to working for Markey, he served as counsel for the House Transportation and Infrastructure Committee. He received his B.A. from Wesleyan University and graduated magna cum laude from Harvard Law School.

Drew Clark (moderator) is CEO of Breakfast Media LLC. He has led the Broadband Breakfast community since 2008. An early proponent of better broadband, better lives, he initially founded the Broadband Census crowdsourcing campaign for broadband data. As Editor and Publisher, Clark presides over the leading media company advocating for higher-capacity internet everywhere through topical, timely and intelligent coverage. Clark also served as head of the Partnership for a Connected Illinois, a state broadband initiative.

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A whistleblower exposed WCO Spectrum scheme estimated to cost T-Mobile $10 million, T-Mobile claims.

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WASHINGTON, June 7, 2023 – T-Mobile is alleging in new court documents filed in a California court on June 2 that WCO Spectrum has engaged in a "nationwide criminal scheme to defraud T-Mobile and its subsidiaries" by artificially inflating prices it pays to lease spectrum from educational institutions.

T-Mobile leases the right to use certain spectrum bands from educational institutions that hold Federal Communications Commission licenses for the bands. The wireless carrier reserves the right of first refusal in most of its contracts which allows the company to match a third party offer to purchase a spectrum license and acquire the license itself.

The filing in federal court alleges that Gary Winnick, founder of WCO Spectrum, formed an illegal enterprise to make fraudulent offers to educational institutions to purchase spectrum licenses intended to raise T-Mobile costs. T-Mobile claims that WCO — which is described as a private investor in educational broadband service spectrum licenses — entered into "secret side agreements" with these educational institutions to pocket a portion of the price hike in the event that T-Mobile matched the third-party offer.

The side contract guaranteed that the licensee will pay WCO a portion, usually 10 percent, of the purchase price. According to T-Mobile, the WCO tried to hide its kickback arrangement by requiring the licensee to sign a non-disclosure agreement. The carrier said the scheme has cost it $10 million.

T-Mobile alleges WCO has, in total, offered the educational institutions more than $1.6 billion for 167 spectrum licenses. The carrier alleges that because WCO cannot follow through on that big of a purchase, it means it never meant those offers in good faith.

To support the scheme, WCO allegedly entered into a fake line of credit agreement with SCH LLC, T-Mobile said. SCH lends the appearance of legitimacy to WCO's offers by purporting to lend WCO the funds needed to purchase the spectrum licenses, claimed T-Mobile.

In actuality, said T-Mobile, SCH's line of credit is a farce as it does not have any apparent history, public presence, or lines of business. According to T-Mobile, SHC exists to create the illusion that WCO's offers are backed by legitimate financing. T-Mobile claimed that SCH receives 8 percent of WCO's kickback.

WCO did not respond to requests for comment.

Faced with the allegedly fraudulent offers, T-Mobile had to choose between spending vast sums of money to purchase spectrum licenses or risk the possibility that WCO would purchase the license and become T-Mobile's spectrum landlord, "almost certainly guaranteeing that T-Mobile would have to pay a king's ransom later," the complaint said.

WCO had allegedly abandoned multiple deals rather than produce documents to T-Mobile that would have unveiled the alleged fraud, the carrier added.

A former insider of WCO and whistleblower alerted T-Mobile to the scheme, read the court filing. The whistleblower allegedly provided documents consistent with his claims and T-Mobile was able to obtain further documents which corroborate the whistleblower's narrative, the carrier said.

In one instance WCO actually signed a contract to purchase a license subject to a T-Mobile lease, which T-Mobile claims is "simply an example of WCO taking steps to cover up its scheme." The deal happened soon after the whistleblower surfaced and WCO learned T-Mobile was aware of the scheme, it said.

T-Mobile says the alleged fraud violates the Racketeer Influenced and Corrupt Organizations Act and California Unfair Competition Law.

"At their core, defendants are fraudsters whose racketeering and unfair and deceptive conduct is precisely the type of behavior that the RICO and UCL statues were designed to redress," read the filing.

25G PONs are ideal to connect customers to 10G or higher speeds, a Nokia rep said.

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WASHINGTON, June 7, 2023 – Providers need to adopt next generation passive optical networks in fiber builds to make the most of federal investments, said David Eckard, vice president of the Broadband Partners at Nokia, at a Fiber Broadband Association event Wednesday.

A PON service can support multiple clients from a single router by splitting a fiber-optic strand from an optical line terminal. It differs from an active optical network which dedicates each end user their own fiber optical line by an electrically-charged switcher that manages the signal distribution from the fiber line to service the end destinations. Both technologies are solutions for fiber-to-the-home network connections, but PONs are often preferred by providers because of the lower cost of deployment.

The 10-gigabit symmetrical PON, or XGS-PON, and the symmetrical 25G PON are evolutions of Gigabit PON, which only provides 2.5 Gbps downstream and 1.25 Gbps upstream.

The industry is beginning to face capacity issues with GPONs which are still being widely deployed, said Eckard. He said that more and more services are requiring higher capacity and the demand will continue to increase as applications evolve to fill capacity capabilities.

Providers need to ensure that they are building the right type of network to support these new applications, he said, pointing to the recently released Apple virtual reality headset set to be released early next year as an example of increasing capacity demands.

Deploying 25G PONs is ideal for providers that want to provide customers with 10G or higher speeds and ensure future applications will be supported by their networks. He predicted that businesses will be the first adopters of 10G and higher speeds.

Eckard also said adopting next generation PONs on fiber networks will also ensure that providers get the most from federally allocated programs like the $42.5 billion Broadband Equity Access and Deployment program administered by the National Telecommunications and Information Administration. That money is expected to be allocated to the states by June 30.

According to network operators, XGS-PON is the preferred standards and networks are being upgraded to meet the standard.

Nokia is a sponsor of Broadband Breakfast.

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