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Using broadband to create? Then you need to live in an urban or suburban area

The U.S. Department of Commerce yesterday put out a report documenting gaps in access to broadband between rural and urban communities as well as the variation in access to broadband within these two communities. The major conclusions of the report was that urban areas had greater access to both wireline and wireless broadband versus their neighbors in rural areas. Also, while population density played a role in which areas have higher access to broadband, locating closer to central cities may be of more significance in broadband adoption.

For example, according to the report, residents living in the exurbs, where population density is around 37 residents per square mile, have greater access to higher-speed wireline services than their counterparts in small towns, where population density is approximately 1,447 residents per square mile. Keep in mind that exurbs are considered as part of the rural community while small towns are urban areas. Exurbs, however, are part of metropolitan statistical areas (MSA) where central cities are the core of their populations. The study concludes that this proximity of exurbs to central cities may play a role in why a smaller density jurisdictions like an exurb may have greater access to higher speed services versus a small town which is not located in an MSA.

As I do here as well as on my other blog at Alton Drew, I place a lot of emphasis on accumulating and using capital, whether financial, or natural as in spectrum. Broadband is capital in the hands of creatives. Whether writers, designers, or app developers, access to broadband is key and if location to central cities increases the chances of quality broadband availability, people like me will be staying in Atlanta and other MSAs.

But what should this say about public policy? Should the Federal Communications Commission create more interventionist policies in order to bring some balance to the variations between and within the urban and rural communities? You can’t order carriers to provide the same speeds to rural and urban areas and universal service funding is far from guaranteeing a provider will enter rural markets to provide higher speed services. Evidence shows, especially where municipals provide broadband services, that new entrants are entering markets where incumbent services already exist.

The best policy would be to allow consumers to signal to market players that they are willing to pay the premium for services that are more costly to provide because of the low population densities. This is the best incentive for attracting broadband providers.

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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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Channeling Ross Perot

Posted September 13th, 2012 in Broadband, FCC, Government Regulation, NTIA, spectrum and tagged , , , by Alton Drew

The great sucking sound you hear is the sound of spectrum being sucked up by Apple’s new iPhone. The federal government has created a bottleneck on spectrum, sitting on approximately 85% of it while regulating severely the transfer of spectrum licenses between those holding spectrum but not using it and those with large customer bases while staring down the pending spectrum doom.

The FCC and the NTIA need to streamline the process for getting this resource into the hands of people who need it.

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Apps economy: What Congress needs to do to develop it

Posted September 12th, 2012 in Broadband, Congress, economy, FCC, Government Regulation, NTIA, spectrum and tagged , , , , , , by Alton Drew

The apps economy is about infrastructure and if Congress wants to see this vibrant industry develop, an industry that, according to testimony before Congress by TechNet CEO Rey Ramsey, has created 466,000 jobs as of the end of 2011, then the focus should be on infrastructure. Here is how Mr. Ramsey put it:

“To sustain and grow this economic activity, Congress should focus on the broader issues of infrastructure and access. We need a national infrastructure that promotes access to spectrum, broadband adoption, working capital, and human capital. And we need to ensure that everyone – from academia to minority communities to vets – have easy access to apps.”

What this means then that if apps development is to continue being an integral part of American commercial activity, we need the Federal Communications Commission and the National Telecommunications and Information Administration to implement policy that frees up more of the spectrum that the federal government is not using.

With only 16% of all spectrum being used for commercial purposes, and the demand for wireless broadband increasing with every new app deployed, the federal government needs to further streamline its policy on spectrum auctions and license transfers.

It’s going to take ten years to prepare government-held spectrum for commercial use once commercial use is approved. This means making decisions now on how much spectrum is going to be released by particular agencies.

Spectrum that is laying fallow in the hands of some carriers needs to be moved into the hands of carriers ready to put spectrum to use now. This is not the time for the FCC to practice wishful thinking when it comes to which carriers the agency believes should be able to get spectrum and which carriers should not. If app developers see dwindling opportunities to push their apps as a result of a spectrum crunch here in the U.S., they will take development abroad. Can the U.S. afford the loss of employment opportunities if this were to happen?

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Section 706 Puts FCC in Unnecessary Bind

Section 706 of the Telecommunications Act puts the Federal Communications Commission in a peculiar bind. The statute requires that the FCC determine whether Americans have access to high-speed, switched, broadband telecommunications capability that enables users to originate and receive high quality voice, data, graphics, and video telecommunications technology.

The FCC concluded that broadband was not being deployed in a timely manner. Factors such as broadband costs, quality of service, and adoption by consumers were hindering deployment.

Can you blame the industry? I say no, not after investing, according to the FCC, approximately $41 billion a year in network deployment. You can’t really fault the federal government, particularly after Congress allotted and the NTIA and RUS spent $7 billion to incentivize the design, construction, and deployment of broadband facilities in unserved and underserved communities.

But with 19 million Americans not having access to broadband, and 14.5 million of them living in rural areas, what more should the FCC do? As a promoter of commerce, the FCC has done a good job encouraging infrastructure deployment, but should it be responsible for encouraging broadband adoption?

Broadband adoption is a market reaction. By that I mean it’s up to consumers to determine the value of buying broadband access and it’s up to producers to create the demand. I got uncomfortable seeing FCC Chairman Julius Genachowski standing in front of a Best Buy talking about the fun apps and gadgets that could run on broadband networks. Fine and dandy, but once the FCC has met its duty to promote commerce by encouraging the deployment of networks, it’s time for the market players, consumers and producers, to do the rest.

Rural residents made a decision to live in rural areas. They should pick up the cost of building their own networks; pick up the cost of accessing current broadband networks, or investigate the alternative technologies that can provide them with access to broadband. Subsidies in the end mean some consumers are paying more than they have to in order for others to get service. Producers will have to rely on controversial cost models to approximate cost information that the market could more easily provide.

To limit the FCC’s interference in the broadband market, Congress could start by eliminating Section 706. By repealing this mandate, the FCC could better focus on ensuring the deployment of a ubiquitous network while the market could focus on sending and receiving more accurate supply and demand information.