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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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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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As We Approach September 11th …

The Federal Communications Commission released on 31 July 2012 an order implementing the Middle Class Tax Relief and Job Creation Act of 2012. The Act creates a First Responder Network Authority. The FRNA will be responsible for implementing a nationwide, interoperable broadband public safety network. The FRNA will hold a single license for use of the 700 MHz D-block (758MHz-763MHz/788MHz-793MHz) and existing public safety spectrum (763MHz-769MHz/793MHz-799MHz).

The Act gives FNRA the authority to issue “open, transparent, and competitive requests
for proposals to private sector entities for the purposes of building, operating, and maintaining the network that use …”

How competitive and how fair will the issue of the requests for proposals be? Will larger, publicly-owned companies such as AT&T, Verizon, and Sprint get a fair shake at these contracts? Or will investors be denied the revenues, rates of return on assets, and dividends these contracts could bring?

The National Telecommunications and Information Administration in a discussion on public safety waiver applications and terminating existing leases in public safety broadband spectrum noted that “[f]or FirstNet to be successful, it must avoid the balkanization that has plagued earlier efforts at interoperable public safety communications and must find ways to lower costs by the economies of scale that ensue from consolidated procurement.”

Seems to me if you want to avoid balkanization, ensure the best carriers are awarded for their proposals to provide the public safety network. Larger carriers have the economies of scale to provide nationwide service.

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Today’s House Small Business Hearing on Broadband a Reminder of Congress’ Role in Commerce

Today the House Committee on Small Business heard from the heads of the Federal Communications Commission, the National Telecommunications and Information Administration, and the Rural Utility Service. Each agency described how it was contributing to the deployment of broadband, ensuring competition amongst broadband providers, and financing the construction of facilities.

The testimony of the agency heads did not provide any new information that would move markets, raise any additional concerns about regulatory uncertainty, or otherwise would cause investors any heart burn.

Notable mention should be given to FCC chairman Julius Genachowski for telling committee members that the FCC intended to continue a light touch approach to regulating the Internet and RUS head Jonathan Adelstein taking the position that industry consolidation was not necessarily good for broadband deployment in rural areas.

My take away from this afternoon’s hearing is the reminder that the Congress is responsible for regulating commerce. Commerce refers to trade on a large scale, usually across states or countries. Large scale trade needs the appropriate infrastructure to move large volumes of goods and services. E-commerce has the same needs from the infrastructure we call broadband.

What Congress needs to do is continue with its light touch approach to regulating commerce that goes across the broadband infrastructure. Speed limits and other network management requirements don’t need to be placed on it. Additional requirements will only dampen economic growth. The innovation and job creation each agency head mentioned today has been emerging from a light touch regulatory scheme. There is no need to change that.

So what is spectrum

Posted February 16th, 2011 in Broadband, FCC, Government Regulation, mobile telephone, NTIA, spectrum and tagged , , by Alton Drew

Sometimes we policy wonks and tech geeks get so comfortable inside the bubble that we forget that a growing number of our audience includes people who may not even know how a radio works and, I suspect, might not even have a radio. So, if my six regular readers will indulge me, I’d like to point you to two good sources that describe what spectrum is and how it’s used in communications.

The first source can be found at http://www.ntia.doc.gov/osmhome/roosa1.html. This link takes you to the National Telecommunications and Information Administration’s online description of the spectrum.

Another good site is located at http://www.howstuffworks.com/radio-spectrum.htm. The site is called HowStuffWorks. This is a good site particularly for those of us, myself included, who only get as geeky as an old Star Trek episode. It provides the same info as the NTIA’s site but is not as technical.

Just keep in mind that spectrum is a range of light. Some of it you can see. Some of it you can’t. This light moves in waves which is why radio signals can travel short or long distances.

As the FCC’s discussion of spectrum progresses, these resources will come in handy.