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By pursuing STEM education and digital media opportunities, minorities can add value to broadband

Posted August 30th, 2015 in Broadband, edge providers, Internet, media and tagged , by Alton Drew

A recent article in the Times-Pucayune has me thinking (again) about the approach inner city communities take to developing their economies.  It has me questioning the entire “community activist” approach to bringing jobs and businesses to an area.  In the article the heads of a number of non-profits and a small business participated in a panel discussion on economic development post Hurricane Katrina.

The panelists raised concerns about billions of public and private sector  coming into the New Orleans area while black businesses were relegated to the sidelines with hardly any of this new capital flowing to them.  If the article caught the sentiments of the panelists correctly, the emphasis of the panel appeared to be on creating more public policy that would ensure more public and private funds go to black-owned businesses.

What I didn’t pick up from the article was any discussion on what value black-owned businesses in New Orleans would bring to an investor; whether these businesses could generate sizable returns on and growth of capital to satisfy an investors.

One area of growth is digital media.  According to an article in The South China Morning Post, an unprecedented amount of capital is flowing to online media outlets like BuzzFeed.com, Vice Media, and Vox Media.

One thing for sure is that it won’t be barbershops, beauty salons, convenience stores, package stores, or fast food restaurants.  These types of businesses make up what you see in black communities.  They have low barriers to entry and are very competitive industries.  They are also what I call “echo effect” industries which most people also call service industries.  These industries pop up to serve people who people who work in what I call the “impact” industries.  In San Francisco, an echo effect industry is a dry cleaners.  The impact industry is Google or a data analytics firm where its workers are creating intellectual property and earning the higher incomes that come with it.

In black communities it’s tough for these impact industries to get started because the first investment in intellectual capital hasn’t been made.  For example, in Delaware only 19% of African American students are enrolled in STEM-related courses. Getting students into these courses is necessary if entrepreneurship in the tech area is ever to grow in the African American community itself.

STEM-related employment is expected to grow 16% between 2014 and 2024, according to the website, ChangetheEquation.org.  Non-STEM jobs are expected to grow 11% over the same period.  And right now students of color are not getting the inspiration they need to pursue the education that leads them into the more lucrative STEM careers.  Again, according to ChangetheEquation.org, African-Americans and Hispanics comprise just over 20% of those who earn computing degrees.

If black communities are to generate business ideas that capture capital and generate higher incomes in the 21st century, its leaders have to recognize the clog in the labor supply line.  That clog is caused by a labor pool that is growing to slow to meet STEM-related demand.  The community approach to generating wealth sets itself up for failure if its leadership does not take a more proactive and innovative approach to managing the community’s political economy. Falling back on arguments for revamping affirmative action alone wont lead to a revitalized economy.

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The pursuit of greater returns on capital resulted in the blurring of telecom, media, and entertainment

Part of the naivete of the net neutrality argument was how it ignored the realities of the broadband industry and the role of capital.  Broadband access to the internet has never been about the democratization of self-expression but about the commercialization of the exchange of information.  Information comes in various forms whether it is scholarly work, news, or entertainment.  As Ivan Seidenberg notes in this piece, the lines between media, telecommunications, and entertainment have been blurring for decades where the silos that once represented media, telecom, and entertainment have finally been broken down.

If investors who put their capital into these industries want to see higher returns, then acknowledging that these walls have broken down is the first step they should take.  Pushing back against government actions that fail to recognize that breaking down these walls is necessary for capital to continue flowing to and growing in these industries should be the second thing to acknowledge.

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Why be afraid of big data?

Posted August 11th, 2015 in big data, Broadband, Federal Trade Commission and tagged , , by Alton Drew

Between April 1982 and November 1984 I worked at a Burger King in Tallahassee, Florida.  I was a student back then at the Florida State University.  The restaurant was located across the street from campus so from time to time I would see some of my friends come into the restaurant to eat.  One would think that putting together a Whopper was no big deal but to some people it is, from getting the condiments right to simply trusting the employee who made the sandwich.

I had two schoolmates that were pretty particular about who made their grub.  One schoolmate, Charlotte Jones, was very particular about me making her food.  One day I was getting off my shift and heading back to Smith Hall. Charlotte was heading to BKs to eat.  She saw me heading to the dorm and asked where I was going.  I said back to my room. At that point she did an about face and headed back to Smith Hall and made sure that she knew my schedule from that day going forward.

Another schoolmate, Candace Pope, liked her fish sandwich done a particular way.  It got to the point that if I saw her coming into the restaurant, I would have her sandwich prepared before she got to the cash register.  All I had to do was say, “It’s up.”  She would then direct the cashier to the sandwich already made.  I was prepared to take care of my friends based on having accumulated data on their buying habits at Burger King. I was able to anticipate their needs.

Fast forward thirty one years and technology is able to do on a massive scale what I was able to do on a micro scale.  Today technology allows business to capture information on their consumers, send that information to data brokers and other information gatherers who categorize and prepare that information for use by advertisers.  It’s an information trade where broadband networks providing the platform upon which information is traded at light-speed.  And part of that information trade takes place in a $120 billion advertising market.

What does this information trade mean for broadband deployment and investment?  The information trade creates the value that signals capital to enter the market.  Capital, seeing high returns from the trade, will move toward entrepreneurs that build digital mousetraps and to broadband facility providers willing to build the infrastructure upon which the digital data trade winds flow.

Data, information, knowledge have been flowing between people, groups and societies from the time man has been on the planet.  My little Burger King example shows how we use business data about consumers every day.  What scares people and in particular regulators, is the abundance of it.  According to Maria Ogneva, 2.5 quintillion bytes of data is created every day.

A forum hosted by the Federal Trade Commission in September 2014 addressed some of these fears, centering on regulator concerns about consumer privacy and the commercial use of data without consumer permission. Panelists were concerned about how data analytic techniques may be either skewing unflattering ads to minority populations, or populating data bases with incorrect or biased information about consumers based on their buying habits or location where they make their purchases.  While only one panelist explicitly mused about regulating data, it was apparent to me that at least some of the panelists were thinking about regulating how data is accumulated, analyzed, and distributed.

The FTC has been recommending that Congress get a bit more aggressive with data brokers, the entities that collect, analyze, and sell consumer data to advertisers.  For example, from a summary of a report the FTC conducted on data brokers in 2014:

“As the Report states, ‘In light of these findings, the Commission unanimously renews its call for Congress to consider enacting legislation that would enable consumers to learn of the existence and activities of these data brokers and provide consumers with reasonable access to information held about them by these entities.’  With respect to brokers that sell marketing products, a majority of the Commission had four specific suggestions for Congress:

  1. Consider giving consumers a way to easily identify which brokers have data about them and where they can go to access it or opt out.  One way to do that:  A central online portal.
  2. Consider whether data brokers should have to clearly disclose that they not only collect raw data, but also combine it with other information to draw inferences about people.  That’s especially important when it comes to sensitive topics like health conditions.
  3. Consider requiring data brokers to reveal more about their sources.  That would make it easier for consumers to track down and correct the source of inaccurate information (for example, a mistake in a public record).
  4. Consider whether consumer-facing businesses should have to clearly disclose that they share information with data brokers and to give consumers choices, including opting out.  For sensitive data – health information is one example – the FTC is asking Congress to consider legislation to require consumer-facing sources to get people’s affirmative express consent before they collect it in the first place.”

Democrats in the U.S. Senate have taken up the FTC’s call for legislative action. Last March S. 668, the Data Broker Accountability and Transparency Act of 2015, was introduced in the Senate, but given the control Republicans have of the Senate and the House, this bill poses little if any political risk to the data broker industry.  The value being brought to the information markets via data brokers continues unhindered by new legislation or regulation.  This is good for broadband deployment as well since, as I stated before, the information trade drives deployment of broadband.

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The FCC’s IP transition order doesn’t slow down data markets, yet

The Federal Communications Commission approved an order yesterday that provides broadband operators with requirements for how they should approach the transition from analog-based networks to 21st century internet protocol networks.  The FCC’s focus was, as expected, on the impact the transition would have on consumers.  Broadband providers are to provide consumers with three months notice of any plans to replace copper with fiber.  Broadband providers are to give interconnecting carriers six months notice of a transition from plain old copper to fiber.

FCC member Ajit Pai raised the argument in a dissent to the order that the FCC’s notice requirement would have a negative impact on the deployment of fiber facilities and investment of capital.  He says:

“First, by dragging out the copper retirement process, the FCC is adopting regulations that ‘deter rather than promote fiber deployment.’”  Mr. Pai questions the logic of requiring capital be invested in maintaining old legacy networks when the deployment of fiber could remedy issues presented by an aging copper network.

FCC member Michael O’Rielly warned edge providers in his dissent that they would be negatively impacted by the requirement that broadband providers seek permission first from the FCC before discontinuing a legacy service.  ”Every communications and edge provider better think long and hard before introducing new services because you may be locked in to providing them for a very long time.”

The irony is that by forcing broadband providers to maintain legacy networks to end users, the FCC runs the risk of creating the degradation of service it hoped to avoid when it implemented its net neutrality rules.  Take for example the FCC’s findings in its 2010 Open Internet Order.   In the order the FCC describes the “virtuous cycle of innovation” that is spawned by the openness of the Internet.[1]

“This openness promotes competition.  It also enables a self-reinforcing cycle of investment and innovation in which new uses of the network lead to increased adoption of broadband, which drives investment and improvement in the network itself, which in turn lead to further innovative uses of the network and further investment in content, application, services, and devices.  A core goal of this Order is to foster and accelerate this cycle of investment and innovation.”

The FCC went on to point out in the 2010 Order that a lack of transparency in terms of network management put edge providers at risk especially where a broadband provider’s activity led to blocking or degrading of content.  The irony is that while the FCC appears focused like a laser beam on promoting competition in the provision of broadband services by making legacy networks available for use by interconnecting and competitive carriers, it has taken its eye off of the real competition on the internet, namely between edge providers that aggregate, display, and distribute data.  These edge providers want their exchange of data to traverse high-speed networks from their location to the end-users.  While their business models may not be directly impacted in the very short run by the FCC’s IP Transition Order, in the immediate run they may find users unwilling or unable to subscribe to their services because deployment by broadband providers of last-mile high-speed facilities are being delayed by the FCC’s latest notice requirements.

1.Federal Communications Commission. Open Internet Order. 2010. https://apps.fcc.gov/edocs_public/attachmatch/FCC-10-201A1_Rcd.pdf