Alphabet's Eric Schmidt nails it: Incremental thinking holding back progress

Speaking at Bloomberg’s Breakaway conference Wednesday in New York, Schmidt also said Alphabet, the holding company that owns Google and other businesses including Nest and Fiber, will probably never break up and its job is to seek out transformative solutions. “There’s tremendous optimism around this next generation of scientists and thinkers,” Schmidt said. “There are problems that bedeviled us for centuries that can in fact be solved.” The government should play a role in accelerating these developments as they’ve done in the past, he said, pointing to initial public investment in Silicon Valley that allowed it to become the high-growth area it is today. Schmidt, who supports Democratic presidential candidate Hillary Clinton, said the politicians and business leaders in the country have gotten used to accepting incremental solutions rather than taking bigger risks for the larger reward of innovative technologies and methods.“Government spends an enormous amount of money on the wrong things,” he said. “I would just like to have a little bit of it on these things which are moonshots, enormous-scale things that can benefit the country.”

Source: Google’s Schmidt Sees Genetics Advances, No Alphabet Breakup

When it comes to modernizing America's legacy metallic telecommunications infrastructure designed for a bygone time of voice telephone calls and cable television, Schmidt nails it when he points to incrementalism as a major impediment. 

As I wrote in my recent eBook, Service Unavailable: America’s Telecommunications Infrastructure Crisis, over the past two decades the nation has concentrated on achieving incremental increases in "broadband speeds" on legacy infrastructure rather than modernizing and replacing it with fiber optic connections for every home, business and institution capable of supporting the Internet-protocol based information, communications and services of today and tomorrow. In my eBook, I propose a crash federal initiative to build it given how far behind the nation has fallen. Google Fiber can't do it alone.

America doesn’t have a “rural broadband” problem. It suffers from incomplete telecom infrastructure.

America’s telecommunications infrastructure deficiencies are often framed as a “rural broadband” issue and frequently compared to the lack of electric service in rural areas of the nation early in the 20^th century. Both the description of the problem and the analogy are wrong.

They’re incorrect for a couple of reasons. First, landline Internet service more advanced than 1990s dialup can often be found in nominally “rural” areas. But typically some premises have access while others a mile or two down the road, or over the hill or around the bend do not. Even premises Internet service providers believe are connected are not, resulting in unpleasant surprises for new residents moving in under the impression service was available. That does not make for a “rural broadband” problem. The problem is partial, incomplete and highly granular landline telecom infrastructure.

By comparison, the lack of electrical distribution infrastructure in rural counties during the first few decades of the previous century was truly a rural problem. It wasn’t granular, with some communities and neighborhoods having power and others left in the dark. Entire rural regions had no electrical service, which was concentrated in cities.

The “rural broadband” label has an unfortunate aspect. It allows legacy incumbent providers and public policymakers to segment off and mischaracterize the problem as one affecting only thinly populated, remote regions of the nation and thus not requiring urgent action.

It does. The United States is a generation behind where it should be when it comes to modernizing its legacy metal cable telephone and cable TV infrastructures with fiber optic cable connecting every American home, business and public institution. If we continue to shrug our shoulders and insist on believing it’s a “rural broadband” problem, the United States risks slipping into third world nation status when it comes to its telecom infrastructure.

Virginia officials seek info about residents’ Internet service | WRIC

Virginia officials seek info about residents’ Internet service | WRIC: RICHMOND, Va. (AP) – Virginia officials want residents to help them pinpoint what areas in the state lack access to broadband Internet service. The new initiative announced Tuesday by Gov. Terry McAuliffe is aimed at helping officials fill gaps in broadband coverage across the state. McAuliffe is asking residents to sign onto a new website RUonline.virginia.gov to let officials know the level of internet connectivity they have.

Policymakers have been doing this all over the United States for at least a decade. This strategy plays well for politicians since it makes them appear concerned about modern telecom infrastructure access disparities and is politically safe because it doesn't offend legacy incumbent providers. Sadly, it doesn't build a bit of needed infrastructure as the access disparities grow more urgent as time goes on.

Multiple fiber connections in some regions while others stuck in 1990s highlights U.S. telecom infrastructure disparities

Google Fiber franchise coming up for vote

This story linked above illustrates the extreme degree of disparate access to modern fiber optic telecommunications infrastructure that is developing in the United States. As the story reports, Louisville Kentucky and environs could end up with as many as four companies building fiber to the premise telecommunications infrastructure (Google Fiber, AT&T, and two other smaller providers). This at the same time millions of American homes and small businesses are offered only dialup or first generation DSL while others make do with satellite, mobile and fixed wireless services not capable of meeting the U.S. Federal Communications Commission's Internet service standard for supporting high-quality voice, data, graphics and video.

The driver of this perverse situation is the winner take all ethic that's part and parcel of the predominant vertically integrated business model in which service providers own both the fiber connection to premises and the services delivered over it. Publicly-owned open access fiber infrastructure serving every premise offers a far more efficient model and isn't prone to customer churn and market failure. Only one fiber connection is necessary to deliver telecommunications services given the substantial carrying capacity of fiber.

FCC brings Internet under Lifeline program – but without universal service obligation

The U.S. Federal Communications Commission has issued a final rulemaking bringing Internet service under the Lifeline program established in 1985 requiring discounted telephone service for qualifying low-income households.

However, under the final rule, incumbent telephone companies are not required to offer discounted Internet service to a Lifeline eligible low-income household requesting service in areas where the companies have not modernized and built out their plants to provide Internet service. That contravenes the FCC’s Open Internet rulemaking adopted in 2015 classifying Internet as a common carrier telecommunications utility under Title II of the Communications Act. Title II requires Internet service be provided upon reasonable request. The final rule also exempts telephone companies receiving FCC subsidies for universal service support in high cost areas from having to provide Lifeline Internet service.

We are sympathetic to ILECs’ (Incumbent Local Exchange Carrier) concerns about requiring them to offer broadband in Census blocks within their ETC designated service areas …where broadband services are not commercially available,” the final rule states. “In addition, for recipients of high-cost support, in those areas where the provider receives high-cost support but has not yet deployed a broadband network consistent with the provider’s high-cost public interest obligation to offer broadband, the obligation to provide Lifeline broadband services does not begin until such time as the provider has deployed a broadband network and is commercially offering service to that area.”

Despite the final rule’s contravention of the FCC’s 2015 Open Internet Rulemaking, the FCC employs Orwellian doublespeak in insisting it does not:

“Our actions today are consistent with the universal service goals promulgated by Congress. Congress articulated national goals in Section 254 of the Act that services should be available at “affordable” rates and that “consumers in all regions of the nation, including low-income consumers . . . should have access to telecommunications and information services.”

Pleas for more competition make case for public option in telecom infrastructure

America’s telecommunications infrastructure crisis is fundamentally a microeconomic problem. Vertically integrated Internet service providers and consumers have difficulty transacting on mutually agreeable terms that consumers regard as offering good value. And about one of five American homes and small businesses can’t purchase landline Internet connections at all because none are offered to them.

Many consumer advocates and commentators frame the economic problem as one of insufficient competition. If there were only more providers offering services, then more consumers would be offered service and at superior value over that sold by legacy telephone and cable companies. After all, that’s how the competitive market works for other consumer services such as home improvement, landscaping, and housecleaning. Offer good service at reasonable value, you’re competitive. If you don’t, you’re not and could end up run out of business by the competition. The same rules should apply to “broadband” since it too is a service, the thinking goes. Consumers want the freedom to ditch their service provider and choose another offering better value.

It doesn’t work that way for telecommunications services including Internet because they are vertically integrated services – typically delivered by the same providers that own the infrastructure to deliver them. Due to the high cost of building and maintaining that infrastructure, there will only be one or two providers. Adding more competitors to build alternate “pipes” to compete with these providers isn’t an option because these high capital and operating costs discourage new entrants. Choice A is the telephone company. Choice B is the cable company. If they both suck on service and value – which they often do -- you’re out of luck.

But there is an alternative – the “public option” as it was termed in the recent policy discussion on health insurance reform: publicly owned infrastructure. That disintermediates ownership of telecommunications delivery infrastructure from the services offered over it like voice, data and video. In doing so, it eliminates the potential for abuse of the monopoly market power of the vertically integrated legacy providers to hold consumers hostage. The potential for abuse is substantial because a home or business must “subscribe” to their connections. Without a subscription to the hookup, none of these services are available. Having ownership of the infrastructure allows them to call all the shots. It doesn’t have to be that way.

There is only one entity in the United States that has the economic capacity to construct publicly owned, modern fiber optic telecom infrastructure that connects all American homes, businesses and institutions: the federal government. I discuss in detail in my recent eBook, Service Unavailable: America’s Telecommunications Infrastructure Crisis.