Friday, February 10, 2017

R&D won't solve America's urgent telecom infrastructure deficiencies

That group “really push[es] a comprehensive narrative that the U.S. broadband -- private-sector broadband -- has failed the country, that we are falling behind other countries in our broadband performance,” said Doug Brake, telecom policy analyst at ITIF and coauthor of “How Broadband Populists Are Pushing for Government-Run Internet One Step at a Time,” released in January. The populists think “we have these rapacious broadband monopolists that are not upgrading and just harvesting rents from the entire population,” Brake said. “We see that narrative as being incorrect on almost all the points that it puts forward.” Broadband populists have a two-pronged approach and use small tactical debates to achieve their overall goal, Brake said. On one hand, they support the bottom-up solution of government-owned infrastructure with internet service providers delivering services on top of it -- even while acknowledging the limitations of that approach. “We think that that model does not fundamentally support long-term innovation,” Brake said. “That’s competition just based on price andcustomer service. It’s not competition based on the technology itself.” He said he’d rather see ISPs incentivized to pour money into research and development of the next generation of broadband, for instance.
The debate over muni broadband expansion -- GCN

Brake's position is utter nonsense. Fiber optic connections to customer premises could have been made to nearly every American home, school and business by 2010 had the nation put in place the right telecommunications policy and planning in the late 1980s and early 1990s when it was becoming apparent that telecom would shift from analog to digital and be distributed via Internet protocol. Fiber optic infrastructure remains the state of the art telecommunications infrastructure technology, with plenty of capacity to carry burgeoning bandwidth demand well into the future. Performing R&D on a possible successor is fine. But it's not going to solve today's urgent telecommunications infrastructure needs that require rapid deployment of fiber connections.

As for Brake's characterization of incumbent legacy telephone and cable companies being "rapacious broadband monopolists that are not upgrading and just harvesting rents," they had better well be. Because it's exactly what their investors expect of them: minimal capital expenditures and maximizing revenues from a captive, natural monopoly market.

Wednesday, February 08, 2017

Gov. Brown sets California's priorities for U.S. infrastructure bill -- but telecom not on list

Brown Sets California's Priorities For Trump Infrastructure Bill - capradio.org: Gov. Jerry Brown’s administration has released its list of California priorities for a potential federal infrastructure funding package backed by President Trump. The list is noteworthy not only for the projects it includes but for the ones left off. On the list? Highway projects throughout the state, including new carpool and toll-charging express lanes. California’s earthquake early warning system. And, of course, Brown’s legacy projects: high-speed rail and the Delta tunnels. “Mostly, the projects that we have submitted all have a request of $100 million or more,“ says the governor's transportation secretary, Brian Kelly. “So we really did focus on larger projects with clear, long-term and short-term benefits to the state.” Notably absent? Two prominent water storage projects backed strongly by California Republicans: Sites Reservoir northeast of Sacramento and Temperance Flat Dam northeast of Fresno.

Also missing from the list: telecommunications infrastructure. This in a state regarded as a leader in information and communications technology and home to Silicon Valley as surrounding communities continue to lack modern fiber optic service. Telecom infrastructure deficiencies are most pronounced in the Golden State's Central Valley municipalities of Modesto and Fresno, in the Sierra Nevada foothills east and northeast of the state capital of Sacramento in Placer and El Dorado counties, and up the Interstate 5 corridor in Sutter, Butte and Yuba counties to the Shasta County seat of Redding. (See related post here). Is is truly good public policy to finance 20th century infrastructure while neglecting vital infrastructure for the 21st?

Sunday, February 05, 2017

U.S. requires crash federal telecom infrastructure program

Like other forms of infrastructure that were largely built out in the 20th century – such as transportation, energy, water and sewage – broadband is a foundation for economic activity across many sectors. But, unlike other potential infrastructure priorities, the public benefits of broadband could grow exponentially in the coming decades, as the nation is just beginning to realize the potential innovation and productivity gains from combining high bandwidth, low-latency connectivity with massive sensor, computing, and storage capabilities.

Unlike most other types of infrastructure, the nation’s digital infrastructure is largely corporate owned and generates revenues from paying subscribers. However, the private carriers who invest in broadband capex do not, in general, capture the full benefits of those investments (e.g., the positive externalities of the internet economy and the multipliers from increasing innovation and efficiency in adjacent sectors), so their investment levels are lower and slower than would be optimal for the country. (Emphasis added). The public-policy challenge, therefore, is to increase largely private capital flows to levels consistent with the potential public benefits of abundant, ubiquitous broadband without crowding out existing private sector investment.

The above is excerpted from a white paper by Paul de Sa, who formerly headed the U.S. Federal Communications Commission's Office of Strategic Planning and Policy Analysis. The paper was published on the U.S. Federal Communications Commission website last month. de Sa's point on the larger benefits of ubiquitous modern telecommunications infrastructure and its economic stimulus and multiplier effect mirrors my own, discussed in my recent eBook, Service Unavailable: America's Telecommunications Infrastructure Crisis.

I fully agree with de Sa's assessment that relying on the current dominant model of privately owned infrastructure where Internet Service Providers own the connections to customer premises as well as the services offered over them cannot support rapid and robust infrastructure construction to catch the nation up to where it needs to accommodate exploding bandwidth demand today and in the future. It's naturally limited by investment risk that comes with selling and servicing monthly subscriptions one customer premise at a time that constrains access to the needed many billions of investment capital and is prone to market failure. Until the United States explicitly recognizes the limitations of this model and treats telecommunications as the national infrastructure asset that it is and launches a crash publicly-financed telecom infrastructure initiative, the nation will continue to rapidly fall further behind as the 21st century advances.

As a footnote, de Sa's paper was retracted this week by his acting replacement, Wayne A. Leighton. (h/t to Steve Blum's blog).

Friday, February 03, 2017

FCC’s O’Reilly defends unacceptable status quo in U.S. telecom infrastructure

As federal policymakers consider addressing America’s telecommunications infrastructure deficit as part of a broad national infrastructure modernization plan, Federal Communications Commissioner Michael O’Reilly has written a blog post clearly intended to lower expectations and preserve an unacceptable status quo. It comes at a time when the United States by 2010 should have had modern, fiber optic-based telecommunications infrastructure deployed serving every home, small businesses and public institution instead of the legacy metallic telephone and cable company infrastructure he wants to preserve. Not to mention the national embarrassment of third world satellite Internet and dialup serving too many American homes where landline telecom connections – metallic or fiber – are nonexistent.

Instead of a robust federal telecommunications infrastructure program, O’Reilly seeks to protect the incumbent telephone and cable companies by preserving their emphasis on “broadband speeds” and the related and increasingly outdated, tail chasing debate over how much speed is sufficient. That fits nicely with the legacy incumbents’ outdated metal cable connections to premises since those lack the capacity of fiber to serve burgeoning bandwidth demand. In his points about geography and population density, O’Reilly also lends support to incumbents’ redlining market practices based on premise density in violation of the FCC’s 2015 Open Internet rulemaking making Internet a universally available common carrier telecommunications utility. That speed-based versus fiber to the premise (FTTP) metric comports with the FCC’s weak subsidy program that funds incumbents’ deployment of obsolete infrastructure on a par with circa 2005 DSL.

In sum, O’Reilly’s position is all about incrementalism and buying more time for these legacy incumbent providers. Public policymakers have already allowed them to buy a quarter century of delay as American has fallen ever further behind in the 21st century, when modern telecommunications infrastructure is as critical as roads and highway were in the previous century. It’s time for that to end.

Finally, O’Reilly -- like former FCC Chairman Tom Wheeler before him --miscasts telecommunications infrastructure as a competitive market. If it were, there would be lots of service providers to choose from and sufficient capital to finance their ventures. The fact that there are not reflects simple microeconomics. High cost endeavors like infrastructure erect natural barriers to new providers. In telecommunications infrastructure, incumbents also exert a chilling effect with their natural monopolies since new providers are reluctant to take on the risk of overbuilding them – a primary reason for Google Fiber’s recent retrenchment.
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