Economic stimulus measure includes $6 billion down payment on U.S. broadband infrastructure

The House Appropriations Committee today released an outline of the economic stimulus funding bill being readied for President-elect Barack Obama's signature after he takes office next week.

The American Recovery and Reinvestment Bill of 2009 will include $6 billion in grants earmarked for broadband and wireless services in underserved areas of the nation "to strengthen the economy and provide business and job opportunities in every section of America with benefits to e-commerce, education, and healthcare." The summary of the stimulus measure estimates that the $6 billion investment in broadband will produce a $60 billion multiplier effect for the nation's struggling economy.

This is just for starters. Blair Levin, a technology advisor to the incoming president, told the State of the Net Conference in Washington Jan. 14 that the $6 billion being set aside for broadband in the stimulus legislation represents only a portion of the incoming administration's planned efforts to boost broadband deployment in the U.S.

Update 1/16/08: For details on how the funding is parsed out, here's what I've obtained from the actual draft legislation.

Fiber infrastructure build out -- not throughput speed-- should be focus of planned stimulus funding

The Washington Post reports today a debate is brewing over how broadband should be defined under the incoming Obama administration's goal to fund new broadband telecommunications infrastructure as part of its planned economic stimulus package. Specifically, the debate is over what level of throughput defines broadband.

Throughput speed is not the issue. Building out fiber optic infrastructure over the local access network -- the so-called "last mile" -- is. Fiber provides a proven, future proof technology that can accommodate the rapidly increasing demand for bandwidth needed by video and other bandwidth-intensive applications. Art Brodsky of Public Knowledge correctly observes in the Post article that providing stimulus funding to telcos for increasingly obsolete metal wire-based broadband services would turn into a wasteful boondoggle.

History supports Brodsky's warning. The bell companies that today comprise AT&T, Verizon and Qwest were to have built out their networks with the tax incentives provided more than a decade ago under the Telecommunications Act of 1996 to provide fiber connections to all homes and businesses by 2006. They didn't. Consequently, the U.S. suffers with incomplete telecom networks that leave millions unable to get decent Internet access more than a decade after the law's enactment. Repeating this error would ignite a race to the bottom and leave the U.S. even further behind other developed nations when it comes to broadband Internet access and modern IP-based telecommunications services.

Rather than large telcos and cable companies, economic stimulus funding should be directed to local entities including for profit companies, nonprofit cooperatives and local governments to construct fiber optic infrastructure over the critical but long neglected last mile.

Minnesota muni fiber project prime example of where broadband infrastructure stimulus funding should go

Blandin on Broadband tipped me to this municipal fiber project whose $18.5 million bond financing goes before North St. Paul, Minnesota voters next month.

It's a prime example of where the new Congress and the incoming Obama administration should be directing economic stimulus infrastructure funding. Federal funding would help reduce the financial risk of these municipal fiber projects by helping them cover their start up costs sooner while creating badly needed jobs and stimulating electronic commerce.

North St. Paul City Manager Wally Wysopal has the right idea in suggesting this isn't simply about filling in broadband black holes but instead is putting in place vital telecommunications infrastructure that can meet the city's needs going into the future. This approach is far superior to simply playing catch up by wasting stimulus funding on rolling out increasingly obsolete copper cable-based DSL that should have been more widely deployed years ago under the incentives and tax breaks of the 1996 federal Telecommunications Act.

"The idea here is to become the best-connected small town in Minnesota," Wysopal told the TwinCities.com Pioneer Press. "We're not getting into this for the sake of providing lower rates for cable or telephone but to provide a service that's superior to anything that's being contemplated today."

Obama calls for U.S. broadband build out

Here's the relevant passage from a speech U.S. President-elect Barack Obama delivered Thursday on his proposed American Recovery and Reinvestment Plan:

To build an economy that can lead this future, we will begin to rebuild America. Yes, we’ll put people to work repairing crumbling roads, bridges, and schools by eliminating the backlog of well-planned, worthy and needed infrastructure projects. But we’ll also do more to retrofit America for a global economy. That means updating the way we get our electricity by starting to build a new smart grid that will save us money, protect our power sources from blackout or attack, and deliver clean, alternative forms of energy to every corner of our nation. It means expanding broadband lines across America, so that a small business in a rural town can connect and compete with their counterparts anywhere in the world.

The President-elect raised the issue again two days later in his Saturday, Jan. 10 radio address:

We’ll put nearly 400,000 people to work by repairing our infrastructure – our crumbling roads, bridges and schools. And we’ll build the new infrastructure we need to succeed in this new century, investing in science and technology, and laying down miles of new broadband lines so that businesses across our nation can compete with their counterparts around the world.

Study estimates tax incentives for fiber to the premises would create more than half million jobs over 3 years

The Fiber to the Home Council commissioned a study issued this week that concludes tax incentives to spur the deployment of fiber optics to the premises (FTTP) would generate more than 200,000 jobs in each of the next three years (2009-11) and increase economic output by more than $100 billion during the period. The report examines the economic impact of allowing builders of broadband infrastructure to fully depreciate their investments and authorizing private and public entities to issue bonds that feature federal income tax credits to help cover the outlay for the deployments.

The report's release is apparently timed in hopes it will be considered as part of a massive federal economic stimulus and infrastructure construction measure being readied by Congress for President-elect Barack Obama's signature soon after he takes office later this month.

The report cites data compiled by Morgan Stanley estimating the U.S. residential broadband penetration rate at approximately 56 percent of all households, projected to grow to 61.1 percent by 2011. Without the proposed tax incentives, an average of 7.3 million homes (equal to six percent of all households) will lack broadband access from 2009 through 2011 without the proposed tax incentives, the study concludes citing Morgan Stanley estimates.

What's odd about the study considering it was done for an organization promoting the use of fiber is that it also examines the effect of tax incentives directed at upgrading and building out existing metal wire-based cable and telco DSL infrastructure offering throughput of 5 Mbs down and 1 Mbs up.

As this blog recently asserted, federal incentives and funding should be targeted to local private and public sector entities with the specific goal of modernizing telecommunications infrastructure over the last mile. History has shown that tax and other financial incentives put in place as part of the federal Telecommunications Act of 1996 failed to provide adequate impetus for large incumbent telcos to build out broadband infrastructure to serve all homes and businesses, leading to the current problem of widespread and persistent broadband black holes.

Netflix and Blockbuster video over Internet still not ready for prime time, but a viable a la carte VOD alternative to cable, telco TV

Reuters reports today that Blockbuster is joining rival Netflix in offering video on demand over high speed Internet connections as an alternative to renting DVDs.

This is clearly where viewing films at home is headed. But over the foreseeable, it's going to be logistically constrained to a small market segment: those areas where broadband connections offer adequate bandwidth to support downloading of standard and especially high definition video content.

On line delivery of video on demand provided by these vendors also offers an alternative to those who don't wish to pay for video programming packages offered by cable and telco TV players and instead prefer to take their video a la carte.

Alabama governor announces initiative to boost broadband availability

Here's the news release issued by Alabama Gov. Bob Riley and an AP story based on the release. According to the AP story, the initiative -- funded mostly by federal grants -- will fund the deployment of both wireline and wireless broadband infrastructure in unserved and underserved areas of the state.

Riley has apparently grown frustrated at the lack of broadband access in Alabama, which according to Federal Communications Commission ranked among the lowest of all states as of June 2007 -- the most recent period for which the FCC has released data -- measured on wireline-based telco broadband availability.

Guiding principles for U.S. broadband infrastructure economic stimulus

As Congressional leaders and the incoming administration of U.S. President-elect Barack Obama mull economic stimulus legislation including a portion of which is expected to be devoted to telecommunications infrastructure to boost broadband Internet access, I offer these guiding principles:

1. The focus should be on the so-called "last mile" or local access network portion of the system. There's a broad consensus that the lack of adequate broadband access in the United States is due to technological shortcomings on this segment of the telecommunications infrastructure, its weakest link. The overall goal should be full build out of this currently incomplete but vital infrastructure to serve all residents and businesses.

2. The "copper wall" that comprises the last mile telecommunications infrastructure is the primary barrier to wider broadband Internet access. It has been obsolete for about a decade and will become increasingly so as demand for broadband access and more bandwidth intensive content like video grows. The copper wall should be torn down and replaced with fiber optic cable, either aerial or buried depending on local construction cost factors and neighborhood preferences. Calls by large telcos for funding for DSL over copper should be rejected. Funding for such projects would keep the U.S. lagging behind other developed nations on broadband telecommunications technology and constitute an economic bailout to build increasingly obsolete technology rather than a true stimulus.

3. The last mile is the most local element of the nation's telecommunications infrastructure. Accordingly, stimulus should favor local entities to replace copper with fiber such as locally owned private companies, local governments and fiber cooperatives, the latter aided by incentives to encourage homeowner-owned fiber over the last mile.

The 12 year period following the enactment of the 1996 Telecommunications Reform Act has shown providing tax breaks and other incentives to large publicly traded telcos has not resulted in adequate capital expenditure on infrastructure to serve the nation's future telecommunications needs or the selection of broadband technology best suited to do so.

As for private providers, Congress and the Obama administration should note that even generous subsidies to incumbent telcos to build out broadband infrastructure may prove indequate as seen from their less than enthusiastic response to a California Public Utilities Commission program that subsidizes broadband deployments in unserved and underserved areas with a surcharge on intrastate voice long distance calls.

The investment cycle of these companies is apparently too short to earn a return on broadband infrastructure investment even at the 40 percent funding level provided by the program -- and even for arguably obsolete DSL equipment proposed in the handful of projects approved by the CPUC in 2008. Accordingly, broadband infrastructure stimulus funding directed to community-based cooperatives, nonprofits and local governments would likely produce the most rapid deployments.