Net Neutrality For All, Part 1

Broadband Expansionism

Ever since the now YouTube famous Google interview of then Senator Barack Obama promoting broadband Internet deployment nation wide,[1] broadband deployment as part of Obama?s overarching $825 billion stimulus package has been a ready topic of conversation in technology circles.? Broadband penetration in the United States is only 25.67% of all Internet connectivity or available to roughly 71 million Americans, ranking the U.S. 19th in the world.[2] Home connections via broadband have risen to 92.4%, creating the argument that the majority of Internet users are engaged in daily activities that require, or at least benefit from, broadband connectivity.[3] Obama has promoted this line of thinking, and believes ?that America should lead the world in broadband penetration and Internet access?.[4] Pushing it even farther, he believes that the Universal Service Fund should be implemented in the expediting of deployment.[5] This line of thinking is more than likely impossible.

Economic Stimulus?

There is no clear winning argument for why America should lead the world in broadband connectivity, first of all.? It is reasoned by Free Press and like minded individuals and organizations that broadband stimulus will be a boon to the American economy and job creation.? This is probably based on a report created by Brookings and MIT scholars that has been circulating recently which claims that ??for every one percentage point increase in broadband penetration in a state, employment is projected to increase by 0.2 to 0.3 percent per year. For the entire U.S. private non-farm economy, this suggests an increase of about 300,000 jobs??[6] What is generally not reported is the continuation of this paragraph, ?assuming the economy is not already at ?full employment? (the national unemployment rate being as low as it can be with a low, stable rate of inflation). At a more disaggregated level, we find that employment in both manufacturing and services industries (especially finance, education and health care) is positively related to broadband penetration.?[7] The point being that the argument can easily be reversed, countering that prosperity and wealth creation stimulate broadband penetration; i.e. Individuals improving their job placement will either have additional wealth to afford a broadband connection increasing broadband penetration in an area, or an increase in an areas social scale drives corporations to expand services into an area that previously was unable to receive that service.? Additionally, the author?s note in a follow-up post on Brookings website that, ?While most communications sector analysts concur that the ability to deliver broadband communications is a critical feature of the modern global communications infrastructure, there is limited recent empirical research on the economic effects of broadband. In particular, much of the available research is now several years old or refers to the benefits of the Internet generally or more broadly of the “digital economy” rather than to the broadband telecommunications infrastructure per se.?[8] This speaks for itself.

Backing Obama?s position and encouraging him to move forward are the 57 member companies and organizations of the Broadband Coalition,[9] many of whom would be involved in building an expanding broadband infrastructure. ?Not to anyone?s surprise being that federal funding would reduce their overall project costs for expanding their broadband networks, which sounds strangely reminiscent of the $200 Billion provided to the telecommunications industry in tax breaks and relief from price controls to build the US a fiber and hybrid-fiber network by the year 2000 that never happened.[10]

Encouraging the expansion of broadband could be beneficial to the country, and there exists the potential to create new jobs and produce a greater commerce revenue stream through that expansion.? But doing so via the spending of federal dollars will only enhance social welfare on the Internet because existing regulations have resulted in too little private investment in broadband. Eliminating government barriers would alleviate any potential benefit from public investment in broadband. Additionally, expansion when subsidized could reduce competition in certain areas.? In grand plans like these, the federal government tends to design their strategy around a one size fits all solution for the entire country.? This isn?t going to work.? Broadband infrastructure will need to be expanded at the state and local level where unique area specific issues can be solved, and the best technology and methods of implementation can be achieved for that specific location.? It would be costly, difficult, and unwise to begin running fiber into the Appalachian Mountains, and WiMax becomes vulnerable to low efficiency when it is set too far away from Internet backbones.

To be continued…

Part 2 can be found here.

-nick