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Looks like Maryland has issues with the IPTransition

Looks like Maryland is jumping on the “stop the IP transition” bandwagon.  On January 8, 2014, the Maryland General Assembly will hear the first reading of HB 48, a bill that prohibits certain telephone companies from replacing landline or wireline service with certain wireless telephone service, subject to certain exceptions.  The bill also prohibits the Maryland Public Service Commission from authorizing such replacements.  The bill appears to provide an out for telephone companies where they can replace landline or wireline service with certain wireless service where the company has received authorization from the customer.

In addition, HB 48 wants telephone companies to document the impact of transitioning from wireline or landline to a wireless system and to provide such documentation to the Maryland PSC for their evaluation.

Sounds to me like the Maryland legislature doesn’t want to spend time waiting on the Federal Communications Commission to get its act together on scheduling IP transition trials.  The impact from this bill, in my opinion, is really a rate increase for Maryland’s wireless consumers.   Limiting the number of wireless subscribers that a carrier can add to its network increases the marginal cost of providing service to existing subscribers.  A wireless carrier will have to pursue pricing schemes necessary for recovering the increased costs.

Prices for wireline customers may go up as well.  Telephone companies such as AT&T and Verizon have argued that it cost more to provide service via old legacy telephone networks.  Digital networks have greater capacity to provide not only voice but broadband data services.  Customers are cutting the cord and moving to wireless only services, accessing the Internet via their smartphones and iPads.  Customers like the convenience of being mobile.  I’m typing this post right now on my laptop connecting to the Internet via WiFi.

States like Maryland believe they are protecting consumers by skirting 47 USC 332(c)(3), which preempts state regulation of wireless rates.  What they are really doing is negatively impacting consumer welfare by forcing telephone companies to provide services over networks that are not the most efficient and these inefficient networks mean higher prices passed on to consumers.

Given the Democratic party’s control of the Maryland legislature, I expect the bill to pass and Governor O’Malley to sign it.

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Let broadband lighten up your kid’s backpack

Posted December 23rd, 2013 in Broadband, Education, knowledge economy and tagged , , by Alton Drew

Sometimes I wonder if my son is a student or an astronaut walking on the Moon.  A sixth grader at one of Atlanta’s charter schools, his week nights and weekends are chock fill of assignments.  It freaks me out sometimes the size of his backpack and any attempts on might part to help him lighten the load is usually met with, “No, Dad.  I need those extra books!”

So I could easily relate to the opening paragraphs of this article in The Huffington Post written by Jim Fitzgerald.   In the article, Mr. Fitzgerald discusses one New York school’s efforts to improve student performance by moving their kids from hard cover text books to text books accessed on cloud-based servers.  The private school in the article saw students save on book fees ( with average fees falling from $600 to $150) and probably backaches as just about every text book was replaced with online access.

As for the cost, Mr. Fitzgerald points to the realism of deploying digital text book access:

“Going digital is not inexpensive. Stepinac had to invest $1 million in infrastructure, including increased bandwidth. The expense has been a barrier in getting most multischool public districts to make the all-digital leap.” 

Archbishop Stepinac High School is a private school and from the article I gather the students are paying for access out of their tuition.  Public schools like my son’s will have to find the political will and budget funds to pay for the infrastructure necessary to provide the bandwidth necessary for access to online text materials.

We are becoming increasingly wired as a society and an economy.  Young people today are tech savvy when it comes to YouTube and Google, but the online research skills and coding skills necessary for competition in the knowledge and information markets can be taught in schools meaning that our high schools need to be wired in order to add value to their educational services.

Here’s to lighter backpacks and fewer backaches.

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There is more to Idaho than potatoes and Debbie Austin

My son and I are apparently keeping up with some of the Joneses.  Yesterday his mother came into town to visit him and presented him with a smartphone.  Yes, a smartphone.  The old man is still in 3G la la land having upgraded from a 2G flip phone back in November 2011. (I’m still smartin’ from having my chops busted by Dr. Nicol Turner Lee for having the audacity to carry a 2G flip phone in public a couple years back).  Anyway, with two cell phones in the house and no wireline, the Chuckster and I are firmly a part of the unit of analysis evaluated by Pew Research and the National Centers for Disease Control (CDC) for determining the number of households that have snipped the cord at home and rely completely on wireless access to communications services.

According to a study by the CDC, 52.3% of adults in Idaho live in households that do not have  a wire line but have at least one wireless phone.  On the lower end, 19.4% of adults in New Jersey live in households that do not have a wire line but have gone the wireless-only way.  In my home state of Georgia, that percentage is 37% while Maryland comes in at 29.4%.

A closer look at the urban areas of Georgia and Maryland show that the percentage of adults that have opted for wireless only households is higher.  DeKalb County and Fulton County Georgia show 41.8% of adults living in households where there is a wireless phone only while the rest of the Peach State is at 36%.  In Maryland, Baltimore City comes in at 39.6% while the rest of the state registers at 27.6% of adults living in wireless only households.

If you have a penchant for old school, legacy land line usage then New Jersey is the state you want to be in, according to a Pew Research study, with 78.9% of households in Tony Soprano land have at least one land line.

Age and wealth have a bearing on whether a household cuts the cord, according to Pew.  Citing additional CDC research, Pew concluded that:

“The wireless-only lifestyle is especially predominant among the poor and the young. According to the CDC, nearly two-thirds (65.6%) of adults ages 25-29 lived in households with only wireless phones, as did three-in-five (59.9%) 30- to 34-year-olds and a majority (54.3%) of adults ages 18-24. A majority of adults living in poverty (54.7%) lived in a wireless-only household, versus 47.5% of what the CDC calls the “near-poor” and 35.3% of non-poor adults; wireless-only households also predominate among Hispanics, renters and adults living with roommates.”

Policy wise this tells me that regulators should not force broadband providers like AT&T and Verizon to continue putting resources toward maintaining old copper networks.  The country, whether for aesthetics, convenience, or financial reasons, showing its preference for mobility and regulations that go against this grain only encourages inefficiencies in resource allocation.

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Broadband helps disrupt the information markets

This morning I’m listening to a segment on C-SPAN’s Washington Journal where Greg Ip, U.S. economics editor for The Economist, is discussing whether the economy is growing.  A caller to the show, a former car salesman, raised the point that thirty years ago when a person went to a car dealer to buy a car, the dealer had very little competition when it came to information on pricing.  The caller pointed out that today’s consumer can access the Internet to obtain information on car prices and remove the car dealer as a bottleneck to information.

I had to agree with the caller.  I bought my first car back in 1985, admittedly on a whim.  You could do that back then.  All you needed was proof of a college degree and a bank account.  If I wanted to verify the price the dealer was offering, I could have referred to a Kelley Bluebook to check what the dealer was offering, but like I said, I bought on a whim.  Today, not only can I go online to the Kelley Bluebook website, I can review car ads online; go to Craig’s List, or shop the websites of multiple car dealers in the vicinity.

Broadband addresses what we wonks refer to as information asymmetry.  Markets fail where there is a lack of sufficient information held on both sides of the market such that an optimal outcome is realized.  Where a delaer may have enjoyed a 20 or 30 percent mark up on a vehicle’s price, the increase in available information may force that mark up significantly lower with savings passed on to the consumer in the form of lower prices; all because the consumer was able to walk onto the lot with additional info literally in the palm of their hands via a smartphone.

This disruption brought about by additional information means a disruption in other markets as well.  Prices paid to labor falls because prices and revenues fall as the result of consumers being better informed.  As prices on vehicles fall, the financial markets are forced to offer lower rates on loanable funds because the consumer is no longer cornered into an overly priced purchase.  They can exercise other options.

Broadband’s disruption of the information markets is great for consumer welfare.

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Broadband connectivity and productivity go hand in hand

The following excerpt from a U.S. Telecom research brief released in March 2013 provides substance to the argument that broadband plays an important role in the future expansion of the American economy.

“Broadband networks are critical enablers of productivity and growth enhancing innovation. As noted above, Marshall Poe describes the attributes of five historical communications media: speech, writing, print, audio-visual, and the Internet.

Among these, he identifies the Internet as especially powerful in generating economic activity, spillover effects, and novelty,another word for innovation. Steven Johnson, in “Where Good Ideas Come From,” offers an even
broader perspective on the role of what he calls “dense liquid networks” in the innovative process, from the formation of the first life forms in the so-called “primordial soup,” to the biodiversity of coral reefs, to the generation of novel ideas through neural networks, to the flourishing of civilization when humans settled in cities. Johnson argues—paraphrasing—that dense liquid networks enable increasingly large numbers of innovative agents to come into contact with one another, colliding and sharing ideas, rethinking and building on existing ideas, and exploring new combinations and possibilities. 

Broadband networks are the essential fluid medium through which today’s information-based
innovative processes occur. Extensive broadband networks connect and make possible
interactions among individuals, businesses, academics, governments, connected computers and
other things, and the information generated by all of these. Broadband networks are an essential
enabler of the creation and diffusion of new ideas across the modern information-based
economy.

In the specific context of data-based innovation, promising technologies such as cloud
computing, RFID-enhanced logistics, smart electrical grids, electronic health records, social
media applications, and big data analytics all thrive in this context. Through the broadband
medium, applications are able to gather, process, and analyze information, and distribute useful
insights, products, and services. Such applications require the transmission of large and growing
volumes of data, to and from widely distributed network nodes, and increasingly in real-time.

Thus, continuous innovation and investment in broadband networks themselves will be necessary
to accommodate ever growing demand and to realize the potential productivity benefits so
essential to economic growth. Competitive investment by the private sector has generated
widespread benefits, bringing broadband to the vast majority of the country and accommodating
usage that grew by a factor of approximately 4,000 from 1996 to 2010. Providers have invested over a trillion dollars in the last decade and a half to provide the essential capacity, quality of service, and application-based innovations needed to accommodate ever increasing network demand from users at the so-called “edge.” 
Policy must now aim to encourage the maximum levels of continuing investment by broadband
providers and the widespread adoption, by consumers and enterprises, of productivity-enhancing
applications. We can accomplish this in part by removing barriers to investment by broadband
providers, removing legacy burdens and encouraging the migration to Internet Protocol networks
for consumers and enterprises.”

US Telecom’s research tells me that as demand for the efficient and fast transfer of information increases, not only will more information consumers need to maintain their connections to the Internet, they will need networks that provide the capacity or bandwidth for maintaining high-speed connections.  That can’t happen if there is the persistent threat of net neutrality petitions constantly being filed and slowing down the deployment of these networks.

Facilitating the flow of data at high-speed won’t happen if AT&T, Verizon, and other owners of legacy telephone networks are forced to spend finite resources on legacy telephone networks that cannot provide the capacity demanded by the businesses, researchers, academics, and consumers mentioned in the report.

The Federal Communications Commission will have to go beyond thinking about tweaking regulations.  The FCC will have to start thinking about repealing regulations.  Just as importantly, the FCC will have to look itself in the mirror and reconsider its overall mindset when it comes to innovation and the knowledge markets.  The question should not be what regulations do we apply.  The question should be how do we get the knowledge market to fly.