Broadband expansion positively correlates with local economic growth, study finds

The Public Policy Institute of California has issued a new study finding a positive relationship between broadband expansion and economic growth, particularly among information-based industries and in areas with lower population densities.

The study is based on a comparison of Federal Communications Commission data on the number of broadband providers by ZIP code and employment data for the period 1999 to 2006.

Study author Jed Kolko however qualifies the findings given the shortcomings of the FCC data that overstate broadband availability and define broadband at throughput speeds most observers today consider outdated.

Kolko also cautions that the availability of broadband is a relatively recent phenom making it difficult to reach firm conclusions on its impact on economic activity. (Not to mention that data from the years 2007-09 were not included in the study)

In addition, the PPIC report notes increased deployment of fiber to the home infrastructure could lead to different findings. If combined with low cost videoconferencing equipment, fiber could also boost telecommuting -- for which Kolko found no demonstrable increase with the most widely available premises technologies during the study period, i.e. DSL and cable.

FCC chief: Formulating U.S. broadband deployment policy "really hard"

Federal Communications Commission Chairman Julius Genachowski offered some perspective this week on why the FCC has asked Congress for another month to complete its policy recommendations on expanding advanced telecommunications infrastructure to all Americans.

"I can't tell you that we've figured out the solution completely and I can't tell you that we'll figure out the solution to this perfectly by the time we do the National Broadband Plan," he told GigaOM, according to this Reuters dispatch. "This is really hard."

Indeed it is, because this isn't about simply tweaking the existing, incomplete infrastructure -- or "ecosystem" as some federal officials have termed it -- that leaves lots of Americans reliant on the outdated copper-based infrastructure put in place decades ago to deliver plain old telephone service (POTS).

As AT&T noted in a recent FCC filing, that system is on the verge of obsolescence. The United States now needs a new infrastructure for a new Internet-protocol based range of telecom services that go far beyond standard voice service. Genachowski has described it as "the critical infrastructure challenge of our generation."

Getting there won't be a natural extension of the old infrastructure but instead a radical overhaul calling for new business models, particularly among the last and middle mile segments. It's as much of a business model challenge as an infrastructure challenge. That scope forces the FCC to engage in original, outside the box thinking -- which as Genachowski aptly noted is hard -- but necessary -- work.

NTIA director downplays enhanced infrastructure competition, wireless as U.S. universal broadband access strategy

Here are National Telecommunications and Information Administration (NTIA) Director Lawrence E. Strickling's comments to the U.S. Federal Communications Commission on the FCC's incubating policy recommendation due to Congress next month on how to best achieve broadband access for all Americans.

The notable points of Strickling's letter: neither competitive market forces nor emerging wireless technologies will necessarily get us there. While not stating so directly, Strickling implicitly acknowledges that wireline telecommunications infrastructure like electric power and water distribution is a natural monopoly due to the high cost of building it. Hence, more competition isn't going to be the answer, Strickling suggests, noting however there should be more competition among broadband Internet access services sold over that infrastructure. That means open access networks, although Strickling didn't use that term explicitly in his letter to the FCC.

As for wireless, Strickling writes, it remains unclear that it could provide a viable "third pipe" to deliver advanced telecommunications (IP-based) services to residences and small businesses. Strickling's doubts are well founded. Tim Nulty, who believes fiber to the premises can pencil out even in rural areas, explains why with an aeronautical metaphor. While wireless may offer mobility, he says, a fiber-optic network connected directly to homes boasts nearly unlimited capacity. "Think about 747s and helicopters,” Nulty told The Progressive magazine. “Helicopters are marvelous when they’re used for what they’re good at. But you don’t use them to fly thousands of people between Boston and Chicago. For that you need 747s.”

Nulty made that observation in August 2008 and it's even more relevant today as bandwidth demand has mushroomed with the proliferation of IP-based video content. It would be a mistake for policymakers to punt on wireline, betting on the come that commercial wireless providers will fill in broadband black holes given the many technological, backhaul, terrain and business model challenges they face. In some areas, they have. But it's only a temporary bridge on the road toward fiber to the premises.

USF reform alone won't achieve universal U.S. broadband

Just as the U.S. Federal Communications Commission set a date for the end of analog broadcast television earlier this year as TV signals went digital, it should also establish a sunset date for the legacy Publicly Switched Telephone Network (PSTN), AT&T asserted in a December 21 filing with the FCC.

The business model for the PSTN -- a proprietary network comprised of central office switches, amplifiers and copper cable plant designed to deliver what's known as plain old telephone service -- POTS -- is in a death spiral as the number of people shutting off their landline voice service in favor of wireless and Voice Over Internet Protocol (VOIP) services has accelerated in recent years, AT&T notes. In the meantime, the telco stated, the FCC should modernize its regulations to ensure an orderly transition from the PSTN to an Internet Protocol (IP) based system, taking full regulatory control and ending state oversight authority originally established for regulating POTS.

However, legacy PSTN/POTS isn't alone in suffering from serious business model problems. So does the IP-based model that is the future of telecommunications. The reason: what AT&T describes as the "enormous" amount of capital necessary to complete the build out of required infrastructure to ensure all Americans have access to IP-based services just as basic telephone service is nearly universal. In its filing, AT&T concedes eight to ten percent of American households lack access to broadband, although another estimate released in October placed the figure higher at 12 percent, including even spotty access in major metropolitan areas.

In order to allow telcos to direct more capital investment to building out broadband infrastructure, AT&T proposes the FCC scrap rules requiring telcos to provide POTS so they can redirect funds to upgraded infrastructure capable of delivering IP-based services. "The legacy PSTN network – which is rapidly hemorrhaging customers and revenue – is now diverting much needed funds from investments in broadband networks," AT&T states in its filing.

AT&T also wants the Universal Service Fund (USF) -- created to subsidize the cost of providing POTS in high cost areas -- retasked to do the same for IP-based services. Doing so would help achieve the Obama administration's goal of broadband access for all Americans, according to AT&T.

But there's a difference between USF subsidies for voice telephone service and IP-based services. Deployment and adoption of basic phone service played out over decades. By contrast, there's a huge reservoir of pent up demand for broadband AT&T and other big telcos assured would be offered to all U.S. households when the Telecommunications Act of 1996 was enacted providing telcos tax breaks and other incentives intended to pave the way for them to universally deploy fiber-delivered telecommunications services by 2006. Didn't happen, obviously.

The FCC and other policymakers should keep this history and differences in demand between POTS and IP-based services in mind. Reforming the USF isn't likely to be the sole solution to remedy market failure for IP-based services. They must also encourage alternative business models such as open access fiber networks owned by local governments and telecom cooperatives through subsidies, low cost loans and tax incentives.

FCC draft broadband plan: Incorrect diagnosis, wrong prescription

The U.S. Federal Communications Commission today unveiled the underlying policy principles that will frame the plan it must present to Congress in February to expand advanced telecommunications infrastructure to ensure all Americans have broadband access. The FCC was charged with developing the plan under the American Recovery and Reinvestment Act of 2009 signed into law by President Barack Obama in February.

A basic principle is encouraging competition to "build on the attributes of the American broadband ecosystem." That's something of a head scratcher as Tim Nulty and other experts have accurately pointed out that telecommunications infrastructure is a natural and not market-created monopoly. It's a lack of adequate infrastructure -- and not vendors who want to offer services over it -- that has brought about the large gaps in broadband availability in the United States.

Given that, it's not apparent how encouraging competition will even begin to fulfill the Obama administration's goal of universal broadband access. The problem isn't lack of competitors. It's lack of any providers because their for profit business models simply don't allow them to profitably deploy infrastructure within broadband black holes. No amount of enhanced competition can alter that business reality.

If the FCC accepts that reality, then its final recommendation to Congress in February must by implication call for alternative ownership and business models for last mile -- and some middle mile -- telecom infrastructure.

Report recognizes lack of broadband access in "non urban" areas of U.S.

When it comes to discussing advanced telecommunications infrastructure, one of my major peeves is the frequent over generalization of the United States into just two categories -- urban and rural -- as if it were still the early 20th century when electric power or other utilities bypassed entire rural counties and regions before they were built out.

In the case of advanced telecom infrastructure, it's far more granular than that. It can be available on one street or road -- even in the burbs -- but not on the next. Indeed, many visitors find this blog after a search query on the vexing question of why they're stuck on dialup while a nearby neighbor can get wireline broadband.

So it's heartening to see that this recently issued forecast by The Insight Research Corporation despite its "urban vs. rural" dichotomy gives some degree of recognition that of an estimated 12 million households in the U.S. that lack access to broadband, not all are confined to rural areas. Some are situated in "non urban" areas, i.e. outlying suburbs, exurbs and less densely populated portions of metropolitan regions.

Here's the relevant excerpt:

While the exact number of households that do not have access to broadband service is unknown, even to the government, INSIGHT estimates that at least 12 million rural and non-urban market households do not have access to any broadband service due to the lack of supporting terrestrial infrastructure.

Insight estimates that with a minimum cost of $1,500 per household, it would cost in excess of $18 billion to build out advanced telecom infrastructure to serve them.