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Let’s not forget how states and local government act as bottlenecks

Former Federal Communications Commission chairman Julius Genachowski shared his thoughts in a post on Forbes.com on how state and local governments may be impeding innovation in the shared economy as well as in the broadband market. Mr. Genachowski recommended to state and local lawmakers that they avoid errors from the past by avoiding allying with entrenched industries and given innovation a chance by recognizing the benefits that disruptive technology can introduce into an economy.

It would have been good for Mr. Genachowski to speak to the issue of cable franchise, I-net, PEG, and other fees that cable companies pass on to consumers as a result of state and local government requirements, yes allowed by law, but in all cases not based on any quantitative analysis.

Innovation and competition are negatively impacted when start up companies cannot enter a local market because of ROW fees or franchise fees that are apparently determined without a demonstration of cost. Did that institutional network that a county wants really have to cost $ 25 million? Was there an alternative? Was the real cost something less?

Unfortunately consumers do not attend franchise hearings and although they are concerned about the cost of cable service and the lack of competitive alternatives, it never occurs to them that their very state or local government may the bottleneck that harms consumers and service providers alike.

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The FCC and Cognitive Dissonance

When you espouse a particular philosophy, but reason, that little voice in the back of your head, says this philosophy doesn’t fly, and your practices run counter to the school of thought you subscribe to, you’ve met a necessary condition for cognitive dissonance. The Federal Communications Commission is at that crossroad, staring at the signs, and wondering which fork in the road it should follow.

FCC chairman Julius Genachowski’s statements yesterday on proposed municipal broadband legislation sent that red flag up; the sign that the agency’s voices in its head were out of sync with the actions it prefers. On the one hand, Mr. Genachowski says the following:

“High-speed broadband is vitally important to our global competitiveness and the continued
growth of our economy, and we must keep pushing for faster speeds and greater capacity through new
investments in broadband networks. This investment has and will come overwhelmingly from the private
sector, which is why it’s vital that we continue to focus on policies to incentivize private investment and
remove barriers to broadband build-out.”

But then Mr. Genachowski starts to sing the benefits of government owned networks (GON):

“If a community can’t gain access to broadband services that meet its needs, then it should be able
to serve its own residents directly. Proposals that would tie the hands of innovative communities that want
to build their own high-speed networks will slow progress to our nation’s broadband goals and will hurt
economic development and job creation in those areas.”

What Mr. Genachowski failed to stress is that GONs, armed with cash from tax revenues, will have access to an interest free source of funding from which to wage broadband war against traditional broadband providers. Also, these GONs may choose, unless prohibited by the very same statutes Mr. Genachowski opposes, to compete in areas where there is already significant service. The robust competition that Mr. Genachowski has spoken about for almost four years would be picked away at if not totally eroded.

The FCC should choose a philosophy on market intervention and stick with it. Either it promotes commerce by allowing the market to determine how resources are going to move or it goes all out and promotes a publicly-owned network that may be more immune to regulation than a privately owned counterpart.

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FCC signals it likes AT&T’s $14 billion broadband play

Posted November 7th, 2012 in 4G, AT&T, Broadband, FCC, Government Regulation, LTE and tagged , , , , by Alton Drew

The Federal Communications Commission is whistling a tune investors should like. Today the regulator of one-sixth of the American economy hailed AT&T’s decision to invest $14 billion in Long Term Evolution (LTE) and IP wired broadband networks as “proof positive that the climate for investment and innovation in the U.S. communications sector is healthy.” FCC Chairman Julius Genachowski noted that today’s announcement brings the total to $200 billion invested in broadband networks since 2007.

According to a statement released earlier today by AT&T, the company expects its LTE network to cover 300 million people by the end of 2014. In addition, fiber deployment is expected to reach an additional 1 million businesses. Also, 99% of customers in wireline service areas will be able access high-speed broadband via IP wired networks or 4G LTE, according to a press release issued today by AT&T.

Of particular interest to investors is the expected mid-single digit growth in earnings per share over the next three years, with unspecified higher growth beyond that.

If the FCC is concerned by an apparent abandonment by AT&T of any plans to deploy copper in the future, the agency did not let on in its press release this afternoon.

“As our National Broadband Plan said, extending wired and wireless broadband across America is the
‘great infrastructure challenge of the 21st century’”, said Mr. Genachowski. “America’s 21st century economy and our global leadership depend on meeting this challenge. Through our groundbreaking steps to free up spectrum, our once-in-a-generation overhaul of Universal Service, our phase-down of the byzantine and outdated inter-carrier compensation system, our Broadband Acceleration Initiative and numerous other actions, we’ve taken major strides to promote private investment in broadband networks.”

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In Response to Genachowski comments in TechCrunch

Posted September 18th, 2012 in Broadband, economy, FCC, Government Regulation, spectrum and tagged , , , , by Alton Drew

Last Sunday, Federal Communications Commission chairman Julius Genachowski wrote an op-ed piece describing America’s standing in spectrum and broadband deployment, its continued progress, and what the country needs to do to promote the markets for broadband and apps. Below are comments I made in response to the Chairman’s piece:

“I’m happy to see Chairman Genachowski acknowledge the need for more broadband deployment. There is an urgency when it comes to spectrum. The emerging regulatory speed bump to getting more spectrum into the hands of wireless carriers is the hoarding of spectrum by government agencies. The FCC and the NTIA should work diligently on identifying and freeing up spectrum that is not being used for national defense or otherwise laying fallow.

In addition, the FCC should encourage state and local governments to remove unnecessary barriers to entry to broadband markets. The FCC should also continue a light touch regulatory regime for broadband. By keeping regulatory costs low, carriers can provide new and innovative service packages that will allow more Americans access to broadband.”

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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.