Kiplinger predicts U.S. tax to bolster telecom infrastructure

The Kiplinger Letter is predicting the U.S. Federal Communications Commission will propose a tax next year to subsidize private telcos and cable companies' cost to build out broadband to serve all Americans. The American Recovery and Reinvestment Act of 2009 tasked the FCC with providing Congress a plan for universal broadband access by Feb. 17, 2010. Kiplinger Senior Associate Editor Richard Sammon forecasts the tax will be part of the plan.

But at the same time, Sammon says enacting such a tax will prove politically difficult. The take away is the FCC should be considering alternative entities that can roll out advanced telecommunications infrastructure for less money than the big telcos and cable companies that must produce hefty profits and pay fat dividends to satisfy shareholders.

That means turning to the nonprofit sector and specifically local governments and consumer-owned telecom cooperatives. There, taxpayer dollars can go farther and these smaller, more nimble entities can move more rapidly to deploy broadband infrastructure to fill in the areas where the business models of the large telcos and cable companies don't pencil out. Instead of new taxes, policymakers should enact tax breaks to encourage homeowners and small businesses to buy their own last mile fiber connections through cooperative ventures and public/private partnerships.

The need for alternative business models is underscored in a report prepared for the FCC by the Columbia Institute for Tele-Information and released last month.

A key conclusion: a significant number of homes -- 5 to 10 million representing 4.5 to 9 percent of U.S. households -- will continue to have "significantly inferior choices in broadband" between now and 2015. "Most of these homes will have wireless or wired service broadband available only at speeds substantially lower than the speeds available to the rest of the country," the report notes, adding that some homes "will have no choice except satellite broadband, which has some performance attributes that make it less satisfactory for many applications than a terrestrial broadband service."

FCC puts broadband in proper perspective

The term broadband -- generally used to refer to Internet connectivity beyond first generation dial up access -- is a component of the larger transformation of the telecommunications infrastructure. The legacy Public Switched Telephone Network (PSTN) system that relies on copper cables and central office switches owned by the phone companies is of the pre Internet period. In the post Internet age, the Internet itself is becoming the phone system. Routers take the place of telephone switches and fiber optics supersede copper cable.

The U.S. Federal Communications Commission (FCC) put broadband into its proper perspective in a public notice issued Dec. 1 calling for public comment on this conversion of telecommunications infrastructure from a "circuit switched network to an all-IP (Internet Protocol) network."

The notice describes broadband as "a leading indicator of the major transitions in communications technology and services" and "a growing platform over which the consumer accesses a multitude of services, including voice, data, and video in an integrated way across applications and providers."

The FCC notice shows the agency -- charged under the American Recovery and Reinvestment Act of 2009 with developing recommendations for Congress by next February on how to best achieve universal broadband access -- is thinking beyond broadband and of the larger regulatory scheme in "the spirit of understanding the scope and breadth of the policy issues associated with this transition" and the "appropriate policy framework to facilitate and respond to" this shift.

Incumbents v. Illinois over proposed broadband stimulus projects

The telco/cable duopoly has gone to battle stations in Illinois, where according to this report in Crain's Chicago Business it's opposing five dozen applications for federal subsidies for broadband telecommunications infrastructure build out including projects proposed by the state of Illinois, Chicago and Cook County. The subsidies are contained in $7.2 billion allocated in the American Recovery and Reinvestment Act signed into law in February.

According to the story, the incumbents contend the projects would overbuild their proprietary cable plants that already provide adequate broadband access. But the Illinois Department of Central Management Services counters that the proposed project areas must rely on leased circuits costing hundreds of dollars per month (such as 1970s era T-1 lines) that are "too costly to achieve statewide 21st-century information and communication capabilities."

Playing the T-1 card? If the state of Illinois has the facts right, this story sheds light on what might be the incumbent telcos' strategy for challenging proposed broadband stimulus projects: simply contending broadband is available most everywhere in developed areas of the United States since anyone can order up a T-1 or higher bandwidth leased line. That's hardly the case when price is taken into account. If this is the linchpin of the incumbent telcos' strategy to shoot down proposed broadband stimulus projects, it's not likely to go over well and will earn the incumbents even greater enmity.

Minnesota wants all state residents able to telecommute by 2015

Minnesota has established a functionality-based broadband goal: all residents of the state should be able telecommute -- work from home -- by 2015. That would require advanced telecommunications infrastructure able to allow them to video conference, according to Rick King, COO of Thomson Reuters, who chaired the Minnesota High Speed Broadband Task Force. That functional definition translates to download speeds of 10-20 Mbs and upload speeds of 5-10 Mbs, reports mnsun.com.

The federal government and other states, particularly those with major commuter congestion and especially those like California looking to reduce greenhouse gas emissions, should look to Minnesota. It has taken a major step forward in defining what advanced telecommunications infrastructure should enable without getting caught up in the feeds and speeds debate over how "broadband" should be defined.

Fighting the future: Telco/cable duopoly resorts to astroturfing to preserve status quo

Here's a key passage from a screed by Tim Karr of Free Press deploring the use of phony grassroots "astroturf" groups by the telco/cable duopoly to cloak its self interested protectionism in populist-sounding righteousness:

On Internet policy, astroturf groups have pocketed millions from industry to fulfill Job No. 1: Lock in incumbent phone and cable companies' control over high-speed Internet connections in America. At present, these companies provide 97 percent of fixed connections into American homes, a status quo they are willing to spend untold sums to maintain.

Brigham City, Utah: Pioneering America's telecom future

America's brightest and most promising version of its advanced telecommunications future is playing out in Brigham City, Utah. Residents there aren't waiting for the incumbent telco and cable companies to build fiber infrastructure to reach their premises. In the pioneering spirit of the great American West where consumer cooperatives formed a century ago to provide telephone service, they're doing it themselves, reports App-Rising.

According to App-Rising, 1,600 residents have paid $3,000 to install fiber to their homes, which will give them access to various providers via one of the nation's first open access networks, UTOPIA.

The concept is right out of a working paper issued one year ago by the New America Foundation authored by Derek Slater and Tim Wu titled Homes with Tails What If You Could Own Your Internet Connection. Like those for solar power, the paper recommends state and federal tax credits to create incentives for homeowners to buy their own fiber.

This concept has great potential to fill in the great many broadband black holes found throughout the West. As the Federal Communications Commission prepares recommendations to Congress due in two months on government policy to expand broadband access, it should put this open access, consumer owned fiber to the premises model -- and tax credits to encourage its use -- on the top of its list.