MobileBurn: Large Carriers Unlikely To Chase Broadband Stimulus

MobileBurn is reporting today that it looks like larger network builders like AT&T, Comcast, and Verizon are unlikely to chase stimulus dollars from the broadband expansion portion of the American Recovery Act.

I predicted this back on the first of April here.

These players are likely to stay on track with their own plans, using their own revenues to build out networks and avoid the potential regulation and oversight that government backed network build outs will probably bring.? The good news for smaller and upstart networks is that this may open the doors to some competition in underdeveloped and undeveloped areas of the country.? Though I prefer government not to be picking winners and losers, there are reasons why big players don’t build out in these areas.? They are either too costly, or won’t produce enough revenue for continued investment.

The problem here is the potential for government backed players to push non-backed network providers out of the market.? Something we will have to keep a watchful eye on in the future as new networks are rolled out using stimulus monies.

-nick

?and Net Neutrality for All: An Advisement Against Regulated Broadband Expansion

I’ve recently posted my paper investigating broadband expansion policy within the broadband stimulus portion of the American Reinvestment and Recovery Act of 2009 on bepress.

You can find it here: http://works.bepress.com/nicholas_brown/2/

Here’s the abstract:

Ever since the now YouTube famous Google interview of then Senator Barack Obama promoting broadband Internet deployment nation wide, 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. 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. Obama has promoted this line of thinking, and believes ?that America should lead the world in broadband penetration and Internet access?. Pushing it even farther, he believes that the Universal Service Fund should be implemented in the expediting of deployment. This line of thinking is more than likely impossible.

This paper looks at the Broadband Stimulus portion of the American Recovery and Reinvestment Act of 2009 to investigate the feasibility of expanding broadband into underdeveloped and undeveloped areas and the forced implementation of Network Neutrality into networks funded by the federal government.

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Be sure to post any feedback you may have. Would love to hear it.

-nick

Broadband Stimulus Plan: Spend First, Ask Questions Later

Originally posted on OpenMarket.org:

There has been some noise in technology circles the last week over the FCC comment period or Notice of Inquiry (NOI) in regards to the broadband Internet portion of the American Recovery and Reinvestment Act otherwise known as ?the stimulus.?

The NOI allows individuals, association groups, public policy organizations like CEI, and businesses to issue their comments, suggestions, advise?anything really?to the FCC. This allows ?the public? to describe how they feel like the funds should be spent and the best strategy to improve the state of broadband deployment in under-served an unserved areas.

The comment period is intended to help formulate the National Broadband Strategy which is required to be completed one year from the recovery act being signed in to law. This means that the strategy will come due around the 17th of February 2010.

There is a major problem with the process that is being used in this case. The majority of the funds will be distributed prior to the completion of this strategy that will decide how best to distribute and use them. Cart before the horse much?

The US Department of Agriculture who has used the Rural Utilities Services (RUS) division to improve broadband distribution in the past has been awarded funds for distribution from the stimulus. RUS plans to distribute its roughly $2.5 billion by September 30th, 2009. The National Telecommunications and Information Administration?who received the bulk of the broadband stimulus funds?will hand out their dollars in three phases occurring Spring of 2009, Fall of 2009, and Spring of 2010.

The bill writers recognized the need to give the issue a good deal of study to attempt to create a solid plan, but the process also seems to indicate that they felt to create new jobs fast, so the funds needed to be spent fairly quickly to provide stimulus to the economy. This creates a Catch-22 and certainly suggests that maybe these funds shouldn?t have been spent at all, or in the very least that they should not have been tied up in the stimulus.

A year-long strategy session is pointless if you hand out the money before the plan is even drafted, and there is a good chance that the strategy that comes out of the session won?t be implemented because the money will have been spent.

Most likely, the strategy will be proposed and written based on who has the funds, not who could best use them. So this broadband stimulus is almost certain to fall short of its goal of increasing broadband access for unserved and underserved areas.

But this is what we should expect from our new, ?smarter? government. The same old, dumb results.

-nick

Verizon, AT&T See the Regulation Writing On The Wall

Originally posted on OpenMarket.org.

AT&T and Verizon are indicating that there is a chance that they will not seek funds from the broadband stimulus portion of the American Recovery Act.

Verizon Executive VP Thomas Tauke has stated that, ?We don?t have any plans to apply; we also have not made a decision not to apply.?

Similarly, AT&T Senior Executive VP told reporters that, ?We do not have our hand out seeking government funds.? But, ?[AT&T is] open to considering things that might help the economy and might help our customers at the same time.?

This reluctance to accept government funding shows that major ISPs realize that acceptance of stimulus funds puts them squarely under the FCC Network Neutrality principles. These principles could bleed into the other networks?such as Verizon?s FiOS TV or AT&T?s U-Verse?that these large Internet players own. Meaning this policy would be the camel?s nose under the tent. I ?ve previously referred to this potential phenomenon as ?Gateway Neutrality.?

Molly Peterson of Bloomberg News confirms that big ISPs realize the danger associated with accepting recovery funds:

AT&T, Verizon and Comcast Corp., the largest U.S. cable provider, say the rules are unwarranted and would hinder their ability to manage congestion on networks they have spent billions to build.

So, it could be that networks built with stimulus funds would have sub par service when compared to networks built without the funds. This forces one to wonder what the point of the multi-billion-dollar subsidy is in the first place.

Additionally, were ISPs forced to merge networks that ran under different principles?those that are neutral like Internet service and those that are very non-neutral like television or phone service?very costly problems could emerge. Trying to slam together TV, Internet, and phone service into one neutral IP-based service could even prove to be financially impossible.

At OpenMarket we often say that government should never be in the business of picking winners. It appears the winners at broadband build-out will be those who avoid picking government.

-nick

The State of the Internet…

…is strong.

But we will be led to think differently in tonight’s faux State of the Union Address. Obama will undoubtedly speak on the subject of what I have decided to call Social Internet Expansionism. This is the extension of networks into rural areas for people that can’t afford or don’t want Internet according to Pew studies, but of whom Obama asserts need it and has determined it will create 300,000 non-farm jobs for every 1 percent increase of penetration. This assertion is of course based on a paper by Robert Crandall, William Lehr, and Robert Litan who have repeatedly stated that their research is being taken out of context. Mainly because the project was completed almost 2 years ago and was looking at 2005 numbers for non-rural areas.

Nonetheless, the Obamulus will pour almost $7 billion into funding projects led by the National Telecommunications and Information Administration and to a lesser extent the Department of Agriculture who previously headed the Rural Utilities Service Braodband Grant and Loan Program (RUS).

My top 10 questions for the President regarding Social Internet Expansionism:

1) Will the public or private sector be building your networks?

2) How precisely will bureaucracy define “unserved” and “underserved” areas?

3) If it is the private sector, how will grant winners be chosen?

4) Will the grantee manage the network after it is built?

5) If so, will maintenance costs be solely their responsibility?

6) Will the government pick winners?

7) What if a grant holder does not have a stake in an area, and they begin building a network in direct competition with an existing area network provider who does not have government financing?

What if a service provider who does not have government financing is pushed out of business because of a service provider that has government financing? Will the out of business service provider receive compensation?

9) If a service provider constructs a network in a government mandated rural area and cannot attain service contracts and therefore cannot continue service in that area, will they receive compensation for any privately invested funds?

10) If Social Internet Expansionism proves unsuccessful, will you return the original investors money in form of a tax rebate?