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African American communities shouldn’t wait on the State to close the digital divide

I have to wonder if the broadband digital divide is more a question of the broadband financing management. I believe more could be done with revenues collected by the black church when addressing the digital divide, particularly in the area of ownership of technology and content delivery platforms.

By some estimates, black churches have collected $420 billion in revenues since 1980. That’s close to $12 billion in annual revenues. I know some black churches invest in businesses within their communities; and while a very small fraction of the venture capital community, African Americans are joining the ranks of venture capital firms.

Venture capital likes areas of that offer large returns and for venture capital those areas are primarily technology. Historically when we talk about the digital divide we talk about access to broadband, but I don’t buy into that definition. African Americans are over-indexed on smart phone ownership and use of social media. Where African Americans are not over-indexed on is platform ownership. While on the energy end the argument has been that the capital intensity for building a grid makes it near impossible for minority ownership of electric utilities, the open architecture of the internet chips away at that notion.

And waiting on government is not a wise plan, if you want to call waiting a plan. The Federal Communications Commission is more concerned with underwriting broadband providers via its Connect America Fund versus promoting the deployment of content delivery networks. Private sector initiatives like those taken by Facebook, Google, and Microsoft to build their own global private networks are best for deploying content delivery networks, not only for the delivery of content but to capture and analyze data as well. This is where the money is, in my opinion, for communities of color and where venture capital generated in communities of color should be going.

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Lifeline is about promoting a good society

Today the Federal Communications Commission voted on a notice of proposed rule-making to extend Lifeline services to include access to broadband.  The internet provides modern society an enhanced conduit for sending and receiving messages and data.  This capability allows businesses to provide innovative services on a cost-effective basis and allows consumers an efficient mode for accessing services.

For example, yesterday I met with my new primary care physician.  Not only was I impressed with her personality and knowledge but I was also impressed with how her office uses the internet to manage patient health.  Her patients can get online and register with her information portal in order to review their prescriptions, other medical information, and contact the doctor or her staff with questions.  I can do all this with a laptop and a high-speed internet access connection.

The internet and the high-speed broadband access services that allow us to connect to it provide mechanisms for society to carry out its purpose: to help spread the risks that threaten the abundance of life.  We join societies in order to share resources, maximize our wealth, and increase our security.  Broadband access does that by giving society’s members access to multiple sources of information and data.

Today’s discussion at the FCC unfortunately got hung up on issues such as fraud and waste.  FCC member Mike O’Rielly was correct when he said that today’s vote should have been a five to zero slam dunk but as Chairman Tom Wheeler also noted, it was unfortunate that the issue had become politicized.

If waste and fraud are an issue then the FCC should take consider a couple approaches shared by AT&T’s vice president for external affairs, Jim Cicconi.  In a blog post posted 1 June 2015, Mr. Cicconi  offered the following:

“First, AT&T believes that the government, not carriers, should be responsible for determining Lifeline eligibility and enrollment.  This is the way most federal benefit programs work, and there’s no good reason for handling Lifeline in a radically different way.  Many of the problems associated with Lifeline are rooted in this flawed approach.  Administrative burdens on carriers today are huge, and innocent mistakes can lead to disproportionate punishment—which in turn discourages carrier participation.  And the potential for fraud by less reputable players is very real.  Moreover, consumers are saddled with difficult burdens if they simply want to change carriers.  Government itself should determine eligibility, and can provide the benefit through a debit card approach much like food stamps.  Consumers could then use the benefit for the service of their choice.”

The FCC should keep its eyes on the prize.  It can play an important role in keeping society’s members connected to today’s most important piece of capital, knowledge.  Waste and fraud, albeit important considerations from an operational standpoint should not be a barrier to implementing equitable social policy.

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In space, one can do fast lanes

A great piece in The Economist discussing increasing the deployment of #broadband infrastructure in lesser developed countries.with the use of lower flying satellites, hot air balloons, and drones. These lower cost options relative to those provided by legacy satellite firms are hoped to provide the “backbone infrastructure that connects wireless telephone companies to each other and to the backbone provider making access to high-speed broadband increasingly feasible for consumers in poor countries.

The article discusses briefly the regulatory hurdles that companies like #Facebook may face when attempting to deploy drones. In addition the article notes that transmission speeds may be higher in space where traffic travels 40% faster via dark matter versus through a piece of cable.

I wonder if the FCC would try to extend net neutrality rules in space should Facebook decide that it’s hot air balloon program could work for underserved rural areas in the United States? Probably not. It’s #netneutrality rules apply primarily to the behavior of broadband internet access providers.

According to Section 8.9(a) of the FCC’s net neutrality rules, a person engaged in the provision of broadband internet access service … shall not engage in paid prioritization. This sentence right here would get Facebook or #Google off the hook for being subject to the rule.

What’s also interesting is the definition of “paid prioritization.” Let’s say that Google or Facebook is successful in launching their “where no man has gone before” initiative to connect the globe via low flying satellites or drones. Let’s also suppose that they decide to go head-to-head with Netflix and provide over-the-top streaming content. Given their size and capital, Facebook or Google could afford to enter a “bill and keep” arrangement with broadband access providers to move their traffic to the last-mile on a priority basis without paying for prioritization. The Facebook or Google brand would give them some traction with consumers given Google’s search prowess and Facebook’s growing bankbook of connections worldwide.

Since the Federal Communications Commission​ allegedly has no intention of regulating rates and would have less incentive to deny a traffic exchange agreement that involves no compensation or advantage for a third-party affiliate, The broadband access provider could increase rates to recover the costs of its clogging network.

Now this scenario assumes that Facebook and Google’s global initiatives are a success, but should their drone and hot air balloon programs work, their will be incentives to connect the dots here at home by making these initiatives available to rural America where demand is great.

I hope they try it….. .

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The liberty to choose content based on value is what civil rights groups should rally on

The civil rights perspective regarding broadband access is severely misplaced.  The narrative in general has been that access to information exchanged over a medium based on internet protocol is a civil right; an enforceable right or privilege guaranteed by the U.S. Constitution which when interfered with by another gives rise to am action for an injury. Civil rights belong to an individual by virtue of citizenship, especially the fundamental freedoms and privileges guaranteed by the 13th and 14th amendments.

The last time I checked the U.S. Constitution, there was no language in there that expressly supports my access to a communications medium powered by internet protocol.  The Constitution didn’t even guarantee U.S. citizens access to communications networks powered by smoke signals, the telegraph, or even the telephone.  One could argue that in today’s modern telecommunications world that the Communications Act of 1934′s mandate that the Federal Communications Commission ensure the a nationwide communications network universally accessible by all Americans creates that right.  I would argue that it doesn’t and that the Act’s supporters in Congress got lucky in that the universal accessibility requirement of the Act was not challenged.

In some ways I’m surprised that Free Press or Public Knowledge have not turned the NAACP or the National Urban League’s “broadband is a civil right” argument into a “right to access a common carrier” argument thus buttressing their incorrect argument that broadband should be regulated as a Title II common carrier or public utility.  Ironically some civil rights groups like and the National Hispanic Media Coalition support public utility-like regulation of broadband and could likely add fuel to Free Press or Public Knowledge’s positions.  Unfortunately for Free Press and Public Knowledge their accusations that legacy civil rights groups are nothing but money-taking hacks for phone and cable companies has provided enough of a taint that most civil rights groups, no matter their position on net neutrality, would prefer stand closer to a spraying skunk that ally with Free Press or Public Knowledge.

Rather than risk getting to close to the edge of inadvertently pushing broadband into a common carrier box, civil rights should push a purer market-based consumer welfare argument when it comes to broadband in general and net neutrality in particular.  Their policy statement should be that federal and state government should not interfere with a consumer’s choice to have certain content delivered to their broadband-enabled devices and recognize that the consumer can enter agreements with internet access providers and content providers based on the value the consumer recognizes in particular content.

Rather than push a civil rights argument that has consumers asking for the government to define access rights, civil rights advocates should take the position that the liberty of consumer choice is a given and that public policy should recognize and respect that.

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Wheeler’s speech to venture capitalists should leave them a bit concerned

Posted November 6th, 2014 in Broadband, digital divide, economy, Federal Communications Commission and tagged by Alton Drew

“Competition, competition, competition”, chanted Federal Communications Commission chairman Tom Wheeler during remarks before the Mid-Atlantic Venture Association, a trade group of venture capitalists.  Mr. Wheeler stuck to the usual theme of competition in broadband access, an open internet, and the availability of spectrum.

Mr. Wheeler, a former venture capitalist, reminded the audience that as the chief executive officer of the federal government’s “network agency”, he was also responsible for optimizing the public’s interest in public safety, competition, and consumer choice.  What would have been more helpful is if Mr. Wheeler adequately fleshed out how the FCC intended to create a competitive market place for broadband access networks.

Just based on the definition of competition I don’t see how the FCC can introduce more competition in either market short of literally determining which and how many players can participate as producers and how many citizens can participate as consumers.  In addition, given the dynamism of the broadband access market, I don’t see why the FCC should be concerned about intervening in markets in order to bring about competition in the first place.

Michelle Connolly and James E. Prieger analyzed broadband market data from the FCC and determined that for the period 2005-2008 there was a tremendous amount of simultaneous entry into and exit out of the broadband markets.  On the national level, broadband market entry rates were between 14% and 19%, rates that are greater than many other industries.  When you account for exit rates at the national level, net rate of entry was determined as approximately 3.1% per year.

When the broadband access market is shrunk down to local levels including zip codes, entry rates increase.  Another dynamic, according to the findings of Connolly and Prieger, is the size of new entrants and firms that survive market entry.  They tend to be the larger firms on average and enter new markets via different tiers or packages of service.  The authors also found that entry and exit activity lessened with the maturity of a market.

When I consider barriers to market entry faced by broadband access providers, I’m not surprised that larger firms contribute significantly to entrance into and viability in a market.   Progressive proponents of competition tend to delete from the discussion economic and regulatory impediments to market entry.  New entrants have to consider sizes of local markets and average income in an area.  Education and age profile also impact broadband access service penetration, according to Connolly and Prieger.  Population density and topography impact deployment of services in rural areas.  Also, in my experience, franchising requirements, such as rights-of-way fees or access channel requirements for broadband operators that provide cable create a barrier to entry for smaller, less financially able companies.

There is also research that describes how competition can be delayed where potential entrants into a vacant market may think twice about entry if they have determined that the market will become contestable due to potential of growing demand.  In other words, according to analysis by Mo Xiao and Peter Orazem, a potential entrant may look for a market where demand is not as high, creating a monopoly or entering an oligopoly that keeps out other entrants.  It may not be worth the expenditure of profits to fight off new entrants into a vacant, high demand market first the first few market entrants.

What kind of policies should the FCC create to increase the number of broadband access provider entrants into a market where smaller companies may not have the scale or financial wherewithal to stay in a market?  Will the FCC continue to subsidize these firms?  If so, what type of support will the FCC give to the consumer?  Demand has to want supply.

And where potential entrants are thinking twice about dipping their toes into a contestable market because of the fear of profit erosion in a relatively near future, will the FCC pursue a policy of subsidizing potential lost profit resulting from the very competition the “network agency” espouses?

Only by honestly grasping the reality that having three or four competitors in a market is not a bad thing will the FCC be able to get off of the competition rant and focus on more important issues such as spectrum allocation and ensuring that section 706 is the only basis for any regulation of broadband access.