Customs Duty

Sonic Telecom customers are concerned about a USTelecom petition that seeks sweeping FCC regulatory relief for its large incumbent telco members. They fear their rates will rise and their service will be harmed if the FCC grants the forbearance petition to free the ILECs from wholesale duties to lease out their networks as discounted unbundled network elements. Local competitors such as Sonic, a northern California broadband and voice provider, can use UNEs to reach customers where their fiber-based offerings aren't available.

USTelecom's bid for incumbent telco wholesale relief faced further resistance from rivals and others in replies to the FCC due Wednesday, though more large ILECs filed support than initially (see 1808070024). New competitors, some state regulators and consumer advocates said the commission should dismiss or deny the petition. Now, they are joined by more than 8,000 individuals filing substantive opposition, according to Incompas. Our review of docket 18-141 appears to confirm that.

PHILADELPHIA -- Municipalities released an alternative model ordinance for 5G small cells, as local officials sought industry collaboration and resisted pre-emption at NATOA’s annual conference Monday. The National League of Cities and NATOA wrote the model local code, which follows a similar framework to the FCC Broadband Deployment Advisory Committee code but is pitched as an alternative. Municipalities should plan for and develop policy on wireless small-cells deployment or risk pre-emption, NLC said in an accompanying guide.

As 25 percent tariffs took effect Thursday on a second tranche of Chinese imports worth about $16 billion, CTA, in its toughest words yet, urged the Trump administration to end its “failing” strategy of trying to use the higher duties to punish China. It's “not working” but instead is “damaging” American businesses and consumers, said CTA President Gary Shapiro. It's “failing to change China's behavior” on intellectual property theft, “putting extreme pressure on American innovation and businesses that invent, design and engineer their IP in the United States,” said Shapiro. Of the nearly five dozen line items that CTA asked U.S. Trade Representative Robert Lighthizer last month to remove from the second tranche, the final version deleted one: alginic acid and derivatives used for many commercial applications (see 1808080028). CTA and other tech interests are fighting administration efforts to impose a third tranche of 25 percent duties on $200 billion worth of Chinese imports, including on IoT-critical connected devices (see 1808220056 or 1808170014). The administration by now "should know something it questioned several months ago: tariffs will not get China to change its unfair trade practices," testified Jonathan Gold, National Retail Federation vice president-supply chain and customer policy, at public hearings Thursday. "Instead, these tariffs threaten to increase costs for American families and destroy the livelihoods of U.S. workers, farmers, manufacturers and small-business owners. There is still time to prevent these harmful consequences. We hope this week’s discussions between the U.S. and China will pave the way for real action that will resolve these ongoing problems and end the trade war before it further escalates."

The divide over the state of fixed broadband competition and deployment deepened in comments posted Monday for an FCC communications marketplace report due by year-end under the Ray Baum's Act. Several industry commenters cited robust market rivalry and activity benefiting consumers, but consumer advocates generally noted shortcomings in competition, deployment and the data used to measure progress. Parties also disagreed on policy proposals. NCTA and USTelecom painted a positive picture and Incompas offered a circumspect view, in comments posted Friday in docket 18-231 (see 1808170049).

The proposed third tranche of 25 percent Trade Act Section 301 tariffs on Chinese imports targets equipment “critical for the build-out” of 5G, IoT and “big data,” says K.C. Swanson, Telecommunications Industry Association director-global policy, in prehearing testimony posted Monday in docket USTR-2018-0026. Swanson is scheduled to testify Aug. 21, day two of four days of Office of U.S. Trade Representative hearings. Requests to testify were due Monday under the deadline USTR Robert Lighthizer extended when announcing Aug. 1 he will “consider,” under President Donald Trump’s direction, raising the third tranche of proposed duties to 25 percent from 10 percent (see 1808010073). The “network-based technologies” in which U.S. companies lead the world “depend on underlying hardware,” said Swanson. “Taxing that hardware,” as tariffs on network servers, gateways and modems would do, will raise costs for consumers, she writes: That "stands to discourage U.S. adoption of advanced technologies in a period of growing global competition.” Duties "will hit so many of the telecom products essential to the operation of the internet,” Swanson says. More than 10 million Americans use the computer networking products Zyxel Communications sources from China under certain tariffs hearings for home internet access and for “network computers in the workplace,” commented the company. Its largest customers include CenturyLink, Cincinnati Bell and Hawaiian Telecom, it said. Zyxel’s router products “are used to proliferate broadband throughout the U.S.,” it said. With 34 million Americans lacking "an affordable and reliable broadband connection,” government levies would run counter to DCC and other broadband initiatives, the company said.

Many parties opposed USTelecom's petition for incumbent telco relief from mandatory wholesale unbundling discounts, resale and other duties under the 1996 Telecom Act. Telco rivals, state regulators and consumer advocates said the petition for nationwide regulatory forbearance would undermine competition and should be rejected as unsubstantiated and overly broad. Verizon was one of the few to support the petition, as comments were posted in docket 18-141, mostly Tuesday, though USTelecom, ILECs and others can file replies due Sept. 5.

Unbundling and resale obligations aren’t obsolete yet, the Public Utilities Commission of Ohio (PUCO) commented Friday in docket 18-141. PUCO opposed a USTelecom forbearance petition seeking FCC relief for ILECs from wholesale unbundling discount and resale duties (see 1808030026). “Many competitive local exchange carriers (CLECs) in Ohio must still rely on the availability of unbundled network elements (UNEs) and resale services to serve their customers,” the commission said. PUCO said it’s not won over by USTelecom revising its proposal to nearly double the amount of time telcos wouldn't be able to raise prices for unbundled network element connections that competitors can use to reach their own customers (see 1806220027). “While the Ohio Commission recognizes that the evolving telecommunications industry has undergone significant changes since the passage of the [Telecom] Act in 1996, it nonetheless believes that even following USTelecom’s proposed modification to its forbearance request, the provisions contained in sections 251 and 252 will likely continue to play an important role in promoting a competitive telecommunications market beyond the time period contemplated in the proposal.”

The Small Business Administration Office of Advocacy cited potential harms from a USTelecom forbearance petition seeking FCC relief for ILECs from wholesale unbundling discount and resale duties. The office said many CLECs are "very concerned" the FCC may grant nationwide relief. "A blanket grant of forbearance in every market could have a devastating impact on small businesses that rely on unbundled network element (UNEs) to serve customers," said SBA advocates' filing on meeting aides to FCC Chairman Ajit Pai, posted Thursday in docket 18-141. Many CLECs heavily invested in deploying fiber networks using revenue from UNE-based services, and then moved customers to their own facilities over time, creating competitive pressures and incentives for incumbents to do likewise, the advocates said. They "urged the FCC to study the impact forbearance would have on small businesses, competition and the deployment of next generation networks." SBA also addressed robocalling, infrastructure deployment streamlining and 3550-3700 GHz band issues. On the citizens broadband radio service, SBA sided with advocates of census tracts for the priority access licenses that will be part of the band. SBA has concerns that adopting larger geographic licenses could “foreclose competition and result in decreased service in rural areas.” Uniti Fiber said UNEs "enable the company to expand its service offerings and network to new customers," and it "relies especially heavily on dry copper loops" and "dark fiber interoffice transport," regarding meetings with Commissioners Mike O'Rielly and Brendan Carr, and an aide to Commissioner Jessica Rosenworcel (here, here, here). It said "the loss (or increase in price) of these inputs will have a significant impact" on its ability to make new deployments and maintain existing services. Blackfoot Communications, an ILEC/CLEC leasing UNEs from CenturyLink, said eliminating its access to UNE loops or increasing their price "would have an immediate and direct adverse impact on businesses in Montana and Idaho," given lack of alternatives. UNEs support Blackfoot's fiber and fixed-wireless expansion, it told Wireline Bureau staffers. It urged the FCC to look at the UNE specifics of each regional Bell. CenturyLink, another ILEC/CLEC, "views purchasing UNEs as a short-term strategy which is part of a larger transitional process," said a filing on a meeting it and USTelecom had with bureau staffers.

CTA wants the Office of the U.S. Trade Representative to remove 54 tariff lines involving many chip-related items plus things like motion sensors from imports from China targeted for a second tranche of 25 percent duties, said Sage Chandler, vice president-international trade, in comments Monday in docket USTR-2018-0018. Chandler’s testimony at the USTR’s Tuesday hearing said the tariffs would bring “disproportionate” harm to U.S. consumers and businesses without thwarting allegedly unfair Chinese trade practices, emailed a CTA spokesperson. "The tariffs will not only impact electroindustry manufacturers’ supply chains, but also may be passed on to their customers’ supply chains and the broader U.S. industrial and infrastructure base," commented the National Electrical Manufacturers Association. Lutron also had concerns. Dell said such measures “would further undermine U.S. competitiveness in information technology.” It said it's "deeply troubled by the cumulative and self-destructive impact" of such penalties "on critical information technology inputs.” Voxx International wants five tariff lines removed, it said, including antenna components.