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Broadband stimulus program example of why government shouldn’t create markets

I took a look at testimony provided by Assistant Secretary of Commerce Larry Strickland to the House Committee on Energy and Commerce as part of its hearing on broadband stimulus. Mr. Strickland made strong arguments for why broadband adoption is necessary, citing the National Telecommunications and Information Administration’s success in meeting deadlines set by Congress for disbursing funds to broadband programs as authorized in the American Recovery and Reinvestment Act.

According to Mr. Strickland, 12,000 community anchor institutions (schools, libraries) have been wired for access to the Internet. Approximately 86,000 miles of broadband network has been deployed or upgraded, and stimulus funding has generated approximately 520,000 new Internet subscribers.

I expected the feel good stuff from NTIA, but, as the committee’s background report implies, does $ 7 billion spent intervening in the broadband access market trump a decade worth of investment by private sector players in the broadband space?

The committee determined that between 2002 and 2011 private broadband providers invested on average $65 billion a year in network facilities. By 2010, 95% of Americans had access to broadband services while two-thirds of households had broadband in the home. Pew Research put out a study confirming the House committee’s determination as to broadband in the home. Sure an additional 520,000 broadband consumers accessing service sounds good, but that number is marginal when 200 million households already have broadband in the home.

The committee is correct when it says that private sector players have incentive to be efficient and minimize waste; it’s their capital, specifically the investors’ capital, that they are playing with and maximizing shareholder wealth requires controlling costs while trying to provide a superior quality of service.

There is nothing that can be done now about stimulus finds that have already been disbursed other than continuing oversight on projects that are not yet complete. What this hearing should do is send a signal to municipalities that wish to proceed with deploying their own networks seeded with funds directly from tax receipts or via bonds guaranteed by future tax receipts. The general intent of this market intervention was to ensure that the unserved and underserved got access to broadband services; access that is priced competitively.

If municipalities want to ensure against waste, they should build only backbone networks where services are not being provided and allow private broadband access providers to deploy last mile facilities; government builds the road while private providers build the driveway.

Otherwise, to avoid the waste identified by the committee, government should stay out of the market making business.

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Suppose Stephen King and Rob Zombie were developing this idea online?

Posted February 26th, 2013 in Broadband, crime, free speech, indecency, privacy and tagged , , , , , by Alton Drew

The New York Times posted a story about a police office who participated in online chats about raping and cannibalizing women, including his wife. The story is horrific because it reminds you what depraved thoughts we as humans may have toward one another and that these thoughts are being expressed online everyday.

Fortunately the women discussed in these chat rooms were not harmed so the prosecution may have a hard time showing that thinking and talking about it was a crime. There was plenty of malice but no bodily injury or harm.

My question is, what would be the difference between a horror movie writer like Stephen King or Rob Zombie sitting in on an online chat discussing different more macabre ways to scare their audiences? Would the notion that the discussion is being held merely for artistic purposes be enough to distinguish the two conversations?

If not, then this police officer might get off. If so, then the Internet might be subjected to a different level of scrutiny.

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HB 282 will not stifle economic growth

Posted February 25th, 2013 in Broadband, Facebook, Georgia, Google, net neutrality and tagged , , , , , , by Alton Drew

Last week a coalition, led by Google, wrote a letter to the chairman of the Georgia House Committee on Energy, Utilities, and Telecommunications urging him to not pass HB 282, the Municipal Broadband Investment Act. The bill, if passed, would require that municipal broadband networks serve only areas that are not being served by a private broadband provider. It also requires that the Georgia Public Service Commission (GPSC) make a determination as to whether an area is unserved and to draft rules that specify violations of the Act.

Seeing Google and the National Association of Telecommunications Officers and Advisors (NATOA) is scary enough. These two have nothing on common other than they represent content providers who would rather not directly pay to have their content distributed over the Internet. Both have been pro net neutrality, NATOA more so, because they don’t want to see their content throttled.

Scarier yet is the lack of support for the assertions made in their letter to the committee chairman. Most glaring is their arguments about how the bill would hinder economic growth in Georgia. What’s hindering economic growth in Georgia isn’t the lack of broadband, although the job creation resulting from construction and deployment of broadband infrastructure wouldn’t hurt. What is really hurting growth in Georgia is the lack of a more diversified economic base compounded by a loss of manufacturing jobs. Also, Georgia is trying to get from under a foreclosure crisis exacerbated by high unemployment.

Even if broadband deployment were the panacea for our economic ills, HB 282 would direct deployment where its most needed; in the areas that are unserved and could probably get a boost from the type of industry where a broadband connection is key.

Google and NATOA should spend less time playing carpetbagger and get to know the state before making unwarranted assertions about economic growth. That phrase has been bandied about to the point where it’s staring to lose value.

If Google and NATOA are so concerned about expanding broadband, they should support legislation that calls for an universal service assessment on cost causers like Amazon, Facebook, and Google, requiring that they pay a percentage of income made from advertisements and/or online retail. That would go long way toward getting the unserved online, whether they reside in an area serviced by multiple broadband providers or none.

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Is the FCC ready to practice a little net neutrality on itself?

Federal Communications Commission member Ajit Pai today shared with the Federal Communications Bar Association some thoughts on injecting some efficiency into the review process at the FCC. You can see his remarks here.

I feel Mr. Pai’s frustration. I remember as a analyst with Telecommunications Reports International my initial bewilderment with how long it took the FCC to make a decision in a docket. I had been spoiled during my tenure at the Florida Public Service Commission where staff and commissioners worked together to move items as quickly as possible through the review process. In addition, we were pretty transparent about the process, including seeing commissioners have lively and invigorating public debates on the issues.

Ironically, Mr. Pai proposed implementing an online dashboard that would give the public a play-by-play view of how well the FCC is meeting its review deadlines and other goals. It’s a great idea, but unless Mr. Pai is a great diver or swimmer, he shouldn’t hold his breath. As much as the FCC talks about robustness and transparency in the industry, allowing a robust public review of FCC actions through a transparent mechanism like an online dashboard is not a part of this FCC’s way of doing business.

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NAB wants to see MetroPCS, T-Mobile transaction go through

Last week the National Association of Broadcasters (NAB) filed a letter with the Federal Communications Commission urging the agency to bless the merger of MetroPCS and T-Mobile. NAB’s president and chief executive officer Gordon H. Smith made some strong free market arguments in support of NAB’s position. Mr. Smith said that the remarkable power of the free market was enabling wireless companies to address spectrum concerns.

Mr. Smith opined that, “[t]his merger is part of an essential transformation that the wireless industry has undergone over the past year alone. Wireless carriers have responded to the initially surprising surge in demand for data by restructuring to rationalize their considerable spectrum holdings.”

Mr. Smith goes on further to say that the merger will help wireless companies use spectrum more efficiently and that “the transaction will address major spectrum constraints facing both T-Mobile USA and MetroPCS by combining their highly complementary spectrum portfolios.”

If anything the merger speeds up the transfer of spectrum from one spectrum holder to the next. It is a lot faster than the voluntary auctions slated to start later this year that would send spectrum from television broadcasters to wireless communications providers. It would make sense that NAB is pulling for T-Mobile and MetroPCS to pass muster. It would probably put less pressure on its member stations to dip their toes into the auction soup.