national broadband plan

The FCC has released its National Broadband Plan and I have perused it, in anticipation of digging into it. The vast majority of reactions seem to agree that it has some good parts and some disappointments. Karl Bode summarizes the plan nicely (as does Glenn Fleishman). From our perspective, it is good on a million details but disappointing on its solutions.

As is usual for me, I'll focus on wired networks.

This plan will not lead to the meaningful competition we all want. It will further cement the power of incumbent providers who have refused to invest -- especially in rural areas. However, it does encourage Congress to "clarify" that the public should be able to build and own networks via local governments and other arrangements. This is the closest we come to a victory.

This is what they have to say about the matter (page 153):

Tribal, State, Regional and Local Broadband Initiatives In addition to Tribal, federal, and state efforts to support broadband deployment, local governments and regions often organize themselves to support deployment in their communities. According to recent market research, as of October 2009, there were 57 fiber-to-the-premises (FTTP) municipal deployments, either in operation or actively being built, in 85 towns and cities in the United States. These deployments collectively serve 3.4% of the FTTP subscribers in North America.

Not all government-sponsored networks serve consumers directly. Several government-sponsored entities, such as NOANet in the Pacific Northwest and OneCommunity in Ohio, are major providers of backhaul capacity in areas that benefit community institutions and local broadband service providers. Their networks are often “constructed” by patching together and opening up to wider use fiber and other connections that might originally have been built for single-purpose institutional needs, such as the needs of government offices and local transportation. By offering up that existing capacity to wider use, including the service provider community, these efforts can benefit an entire community, not just one institution.

While it is difficult to measure the impact of many local efforts, these efforts should be encouraged when they make sense. However, 18 states have passed laws to restrict or explicitly prohibit municipalities from offering broadband services. Some states, like Nebraska, have outright bans on municipalities offering any wholesale or retail broadband service. Other states, such as South Carolina and Louisiana, set conditions that make municipal broadband both harder to deploy and more costly for consumers.140 In addition, restrictions on the use of institutional networks can substantially impede the ability of local and regional authorities to utilize that infrastructure to benefit the broadband needs of the community as a whole. Restricting these networks in some cases restricts the country’s ability to close the broadband availability gap, and should be revisited.

This leads to Recommendation 8.19:

Congress should make clear that Tribal, state, regional and local governments can build broadband networks.

In describing this recommendation, they suggest publicly owned networks are a final resort:

Local entities typically decide to offer services when no providers exist that meet local needs. These local entities do so only after trying to work with established carriers to meet local needs. This experience is similar to how some municipalities responded in the early part of the 20th century, when investor-owned electric utilities left rural America in the dark while they electrified more lucrative urban centers. Public and cooperatively owned power utilities were created to fill the void. More than 2,800 public and co-op operators still provide electricity to 27% of Americans today. Many of these same rural areas now face similar challenges attracting private investment to connect civic institutions, businesses and residences to highspeed data networks. In some areas, local officials have decided that publicly–owned communications services are the best way to meet their residents’ needs (see Box 8-5 [describing BVU]).

Municipal broadband has risks. Municipally financed service may discourage investment by private companies. Before embarking on any type of broadband buildout, whether wired or wireless, towns and cities should try to attract private sector broadband investment. But in the absence of that investment, they should have the right to move forward and build networks that serve their constituents as they deem appropriate.

Thus we see that the FCC, which has just completed a 376-page report describing how the private sector has failed to build the networks we need, continues to see the private sector as the best entity to build and operate these networks.

In short, this is my biggest frustration with the report.

Forget that their first goal is for the U.S. to somehow "lead the world" in 2020 with 100 million connections at the speeds commonly found TODAY in several peer nations.

Let's focus instead on its anti-public sector bias in revisiting the history of infrastructure networks in US history (page 3):

Private investment was pivotal in building most of these networks, but government actions also played an important role. Treasury bonds and land grants underwrote the railroad, the Rural Electrification Act brought electricity to farms and the federal government funded 90% of the cost of the interstate highways.

Let's see, the public sector paid for almost all the highways, provided the land and financing for the railroads, and merely electrified most of the country's land mass while leaving the profitable areas for the private sector to take care of. It sure as hell seems like public investment was pivotal in building those networks, not private. But instead, we see another federal agency going out of its way to reassure the private sector that despite the U.S. being totally not competitive in broadband internationally, we all really really value their contribution.

Perhaps the most fascinating omission of this report is that it ignores the areas of the U.S. that have already met the goals set forth. Lafayette, Louisiana, is building 100Mbps symmetrical connections to every home in town - one might think the FCC would have been interested in mentioning that. Unfortunately, it doesn't fit into the FCC's narrative that public broadband should be a last resort. Lafayette already had broadband - they simply wanted better broadband from a provider that put the community first. It was not a last resort, it was a good policy choice.

This report gets many of the details right when it comes to why these networks are important, but it does not learn from all the past networks they cite as being transformative -- that the public sector has an incredibly important role to play rather than a minor one. The public must control the infrastructure to ensure it is not monopolized by narrow interests. And in this case, those narrow interests probably love this report.

This is a plan for ongoing public subsidization of privately owned networks. Even if it leads to a temporary spike in broadband investment, it does not solve the long term problem in the way that rural electrification did - by making sure that the infrastructure was accountable to communities.

If nothing else, we continue to hope that this plan will make it easier for communities to build the networks they need themselves. The FCC has made a weak recommendation that this happen - we'll see what Congress says. This plan makes it clear: DC is not coming to the rescue - communities can choose to be self-reliant (depending on the state) or they can take what the private sector gets around to offering.

Update: My criticisms of The Plan should not be interpreted as being anti-Plan. In fact, I think the Plan moves us forward as a nation in some key ways (as noted by Karl Bode in the link above) -- but I also think the Plan makes some fundamental mistakes. Nonetheless, I offer my thanks to all the work the FCC put into producing this. It was certainly a Sisyphusian task.

We finally have a realistic estimate of the cost of bringing 100Mbps to every home in America... and Light Reading labeled the cost "jaw-dropping."

Want to provide 100-Mbit/s broadband service to every U.S. household? No problem: Just be ready to write a $350 billion check.

Federal Communications Commission (FCC) officials shared that jaw-dropping figure today during an update on their National Broadband Plan for bringing affordable, high-speed Internet access to all Americans. The Commission is schedule to present the plan to Congress in 141 days, on Feb. 17.

Don't get me wrong, I agree that $350 billion is a lot of money. On the other hand, we spent nearly $300 billion on surface transportation over 4 years from 2005-2009. $350 billion buys a fiber-optic network that will last considerably longer. Additionally, such a network will generate considerably more revenue than a highway. In fact, these networks will pay for themselves in most areas if they can access to low-interest loans.

Consider the comments of Deputy Administrator Zufolo (of the Rural Utilities Service) from my recent panel at NATOA:

Zufolo explained the RUS decision to use its $2.5 billion in funds primarily to subsidize loans and not provide grants, as the agency's best opportunity to make the more efficient use of the federal money and have maximum impact. Because the default rate on RUS loans is less than 1% and the subsidy rate is also low, only about 7%, it costs the government only $72,000 to loan $1 million for rural network development, she said.

Let's say that RUS decides to embark on getting 100 Mbps to everyone in a rural area - some of the projects will be riskier than the standard portfolio, so let's assume it costs the federal government $100,000 to loan $1 million (makes it easier math too). In order to spur the $350 billion investment for these networks, the government would have to put up $35 billion.

But it would probably be more than that because some areas - Montana, Alaska, Wyoming, and other beautiful places will need partial grants on the upfront costs because even a loan at 0% interest may not be serviceable due to the challenges of spreading high fixed costs across so few people.

If the U.S. were to commit to this, it would not do it in one year. Industry would have to scale up significantly - it would take a number of years to produce all the of materials needed to build a network on this scale, as well as training all the additional people who would be needed to enter the workforce in this sector. So we are talking about what - $7-12 billion a year to build the single most important infrastructure of the coming decades? This is a jaw-dropping figure in that we have not yet done it. No wonder other countries are leaping ahead of us.

Remember though, this cost would build one network. We need to abandon the idea of each competitor building a distinct network with which to compete and to embrace a publicly owned open access network that enables many service providers to compete. The publicly owned network will deal with the largest costs of building the infrastructure - just as the public sector does in most aspects of our lives (roads, sewer projects, bridges, rail, canals, and significant portions of the electrical infrastructure 80-100 years ago).

Update: I wanted to echo the calls of the Knight Center for Digital Excellence in calls for a much bolder vision than we have seen thus far:

Imagine if we had made the mistake of building ordinary roads when, in the 1950s, true progress required an interstate highway system. We are at a similar juncture, which is why the time calls for the high ambition of gigabit speeds.

Image used under Creative Commons License from Briar Press.

This is a slightly older story, but I wanted to make sure it made the rounds.

In "FCC Hires Industry Shill to Develop US National Broadband Plan," OpenLeft.com's Chris Bowers details the shady history of Scott Wallstein, the economics director of the FCC broadband task force.

His past affiliations and quotes regarding the state of broadband in the U.S. are quite troubling. He has said that the U.S. does not have a broadband problem and has a long history of working with "coin operated" think tanks like Progress and Freedom Foundation (so named because they tend to produce reports justifying whatever their corporate funders desire).

This is deeply troubling as his past positions run directly counter to many of the values espoused by President Obama and his FCC Chairman, Julius Genachowski - particularly on the important issues of open access and network neutrality.