March 19, 2011 6:14 AM
Woke up quick, at about noon
Just thought I had to get to Comp[Tel] soon . . .
", O'Shea Jackson ("Ice Cube"),
Eric Wright ("Eazy E"), Andre Young (Dr. Dre), 1986
I'll be moderating a panel at COMPTEL
in Las Vegas on Monday, entitled "And the Winners Are . . . .
" The panel features BTOP awardees, ION Holdings
Attendees will not only learn about the projects funded under the federal BTOP/BIP broadband stimulus grants
, but will gain some valuable insights into little-discussed entry barriers for shovel-ready projects, and learn about how broadband projects create their own demand (separate and apart from the demand that justified the project). Think of this last point as the broadband version of Keynes' interpretation of Say's law
, that supply creates its own demand
The panelists will be discussing interesting and diverse projects, so each will provide something new for attendees to learn. For example, we have what I might call an "ultra" wholesale project--completely carrier/user agnostic dark fiber--being implemented by Maine's GWI. A more traditional, carrier-class, lit fiber wholesale network, primarily in upstate New York, being implemented by ION Holdings, and, finally, last mile broadband projects serving a number of communities in Arkansas, by Windstream.
This is an opportunity to get beyond the D.C. "policy" circles, and find out what's really involved in implementing shovel-ready broadband deployment projects, and what kind of jobs different kinds of broadband deployment--dark and lit fiber (primarily regional and local wholesale transport), and last mile, end-user broadband--can add to a previously-unserved area.
If you won't be attending, but have some questions you'd like asked, email me and I'll see what I can do. Alternatively, if you'll be at the show, please attend and introduce yourself. I'd love to meet you.
March 16, 2011 7:53 PM
Today is the one year anniversary of the National Broadband Plan
. The Broadband Plan recommends, as a catalyst for broadband deployment, that the FCC undertake long-needed reform of its Universal Service Fund ("USF") and intercarrier compensation regimes. Last month, the FCC released a Notice of Proposed Rulemaking ("NPRM")
, proposing to reform both programs. Noticeably absent in either the National Broadband Plan or the USF/ICC NPRM is any defined ongoing role for the states in either the national goal of spurring broadband deployment, or under a reformed USF/ICC regime.
There is an important role for the states in a new, broadband-centric, regulatory system. But, to get there, the FCC has to put consumers at the forefront, considering that the purposes of its proposed reforms are to make high cost support more efficient, and further extend broadband into high cost areas. It is possible to accomplish both objectives, while giving the states a meaningful role.
The communications visionary (and "patron saint" of Wired Magazine
) Marshall McLuhan
, observed, "[m]ost of our assumptions have outlived their uselessness
." The assumption that the FCC should distribute money to carriers, based on the carrier's optimal utility
, in order to satisfy consumer demand
is an assumption that has outlived its uselessness.
How would a better plan work? First, get rid of the notion that state participation should be accomplished through state regulators. They, too, are trapped by assumptions that have outlived their uselessness. And, to be sure, the assumptions underlying the distribution of High Cost subsidies are useless--the FCC makes that case quite persuasively in its NPRM.
Consider this statement of Indiana Commissioner Larry Landis, on reforming the low income fund
, "[t]oo little attention has been paid to the financial health of the RLECs (and mid-size companies) and the importance of existing High Cost support
." Jt Bd Refferal Order, Sep. Stmt. of Commissioner Larry Landis
. This sentiment is antagonistic to nation's technological goals, and offers no solutions.
While, concern for the welfare of the rural consumer is important, rural consumers' rights are a part of the law, and not up for debate. On the other hand, no carrier has a right to be inefficient
and still be in business. So what's the answer?
I outline the long form here:Abstract_Managed Broadband Markets.doc
. The short answer, though, is to involve those parts of the state that are responsible to the NTIA
for spending the states' broadband mapping/BTOP money. Accountability and efficiency are built into their directives, plus they already have to report on their success. But these state agencies can contribute more.
There are no real "markets" for rural consumers in high cost parts of a state, but the state BTOP point-of-contact is a natural market maker. These agencies could function in the role of broadband development authorities. They already know where open access local and backhaul networks exist, and they could work with rural broadband providers (including ILEC, cable, wireless, and satellite providers) to put together efficiently sized demand RFPs and match them with bidding (or reverse-bidding) supply consortia.
But, what about the "financial health" of the rural carrier? Some, funded with the almost $40 billion or so in High Cost support since 1998 (Jt. Bd. 2010 Monitoring Rept
., Chart 3-1) will, no doubt, be efficient parts of any bidding consortium. If not, why must consumers care?
Much greater sums of competitive fiber investment--arguably more important to the health of a broadband economy--were not protected from market risk. During the "telecom bust" of the early 2000's, an estimated $2 trillion in stock market wealth was destroyed
as a result of over-investment. Is it foolish to think that RLECs, too, may have "over-invested"? It would be shocking if they didn't when, since the modern High Cost fund began dispersing subsidies, the "prime rate" for borrowing has been comfortably below
the RLECs government-protected rate of return of 11.25%. Why should the privately-owned, publicly-subsidized, rural LECs fare any differently from their privately-funded brethren?
States have an important role to play in the reform of the USF and stimulating broadband deployment. However, the FCC should update its assumptions about what state agencies they find most helpful to accomplishing the Commission's goals. The NTIA points of contact for broadband mapping/grant purposes are ideal. By playing the intermediary between "suppliers" of high-cap backhaul, and the most efficient aggregations of local demand, the state agencies could--using "real" markets--determine the most efficient way to bring the best broadband/voice service to the most consumers.
February 23, 2011 12:16 PM
When Congress allocated $350 million for a National Broadband Map ("the Map"
), as part of the Recovery Act
(at p.14) I was skeptical, but optimistic
. After seeing the Map, when it was unveiled last Thursday (well, I really couldn't get in until Friday--there were that many hits), I think it actually exceeded my expectations. Larry Strickling
, the head of NTIA
, and Anne Neville
, who headed the NTIA mapping team, (along with many others at NTIA and the states) are to be warmly congratulated for their efforts. Is the Map perfect now? Of course not; but the Map is a work in progress, and it's only going to get better and more useful.
If you need some facts, here they are
. The actual cost of the Map turns out to be $200 million over 5 years. The Map will be updated every 6 months, based on information from awardees of the NTIA's Broadband Technology Opportunity Program ("BTOP") grants
, state information (the NTIA website also lists state broadband maps
), and based on crowd-sourced information obtained from the public to update the Map (and correct inaccuracies).
I'm confident that the Map will pay for itself in multiples, and--in any event--will come nowhere near being the second most expensive visual effect in history. (The first, of course, being the special effects needed to make it look like Chuck Norris lost a fight with Bruce Lee in "Way of the Dragon."
So how is the Map going to pay for itself? Well, aside from the obvious--which is in providing consumers information that allows them to learn about broadband availability/alternatives in their area--I see at least two big ways that the Map can increase consumer welfare: 1) by increasing broadband penetration, and 2) saving Americans money by imposing efficiency on the Universal Service Fund ("USF").Increasing Broadband Penetration
The Map--because it is designed to be dynamic--serves as an excellent "ice breaker" between sources of supply and demand, and state mapping agencies/business development authorities. Even now, middle mile and long-haul carriers can superimpose their own network maps on the Map and see areas that may be demand-starved. Customers, and potential customers, can then approach state development agencies to inform them of latent demand--or even "invisible" demand.
An example of invisible demand might be an area that is rich in cheap power, but broadband-poor. Prior to the information-sharing that the Map will stimulate, it is possible that no one would have ever located data centers in that area. But, with the potential for broadband, and high capacity backhaul, data centers, remote healthcare, and wireless broadband providers might become more interested. One heretofore "invisible" anchor-tenant could be the catalyst to bring broadband to currently unserved areas. Similarly, state development agencies--with their own versions of the Map--are well situated to be a natural conduit for information between communities with latent/invisible demand and proximate middle mile/last mile carriers. Thus, the Map--for some areas--will become a catalyst in creating new broadband facilities/markets. USF Reform
This is a really big "if", but if the FCC really wanted to get serious about bringing broadband to unserved areas in the cheapest way possible, the Map provides an excellent vehicle for reducing payments to areas where at least 2 providers already provide broadband. You see, the Map has a feature that allows viewers to track broadband availability by USF study area. Using this information, the FCC could better target funds to truly unserved areas.
The FCC could also eliminate existing inefficiencies by using the Map to either eliminating funding in multiple-provider areas, or by combining multiple-provider study areas with adjacent study areas that are unserved, or served by only 1 provider, to maximize the value of "reverse auctions." In this manner, "reverse auctions" would have meaning, because multiple bidders would be assured and consumers would get new infrastructure at the most efficient cost. Bottom Line
: Consumers should ultimately reap plenty of rewards from the Map. As an information-sharing device, the Map will stimulate markets in ways that cannot be predicted or quantified right now. Moreover, the Map could be used to promote efficient USF reform, but, unfortunately, the Map cannot overcome political cowardice--so maybe we shouldn't hold our breath on this one.
December 29, 2009 11:57 PM
Earlier this month, on December 17th, the White House announced the distribution of the first round of Recovery Act broadband grant awards
. Notably, of the $183 million in broadband grant awards to be awarded by the Department of Commerce (through the NTIA) and the Department of Agriculture (through the RUS), the NTIA awarded over $120 million toward wholesale, "middle mile" infrastructure. A short summary of the NTIA awards, including the "middle mile" projects is available here
The reason that I highlight the NTIA's decision to devote the bulk of its funds to wholesale infrastructure supply projects is that--as I explained back in April
--I truly believe that this approach is the best way to do a job that is extremely difficult to do well. The Recovery Act requires both the NTIA and the RUS to distribute a very large amount of money in a very short period of time. While the Recovery Act does contain policy guidance to the awarding agencies, and some built-in safeguards, such as limiting the federal government to funding, at most, 80 percent of a project's cost (unless the grantee obtains a waiver from the awarding agency), the responsibilities charged to the NTIA and the RUS are still formidable.
The combination of: 1) direct aid (grants, not loans), 2) the sheer amount of that direct aid (a little less than $6.5 billion in "unrestricted" grant funds, and a total of $7.2 billion in total funds), 3) being distributed by government bureaucracies, 4) in a very short time period (by September 30, 2010) makes the job of efficiently distributing the grant money extremely difficult. Adding to the difficulty of efficiently distributing the broadband grants is the fact that the agencies have little objective tools--such as the "broadband map" (my thoughts here
) authorized by the Recovery Act, but not required to be completed until after the grant funds are required to be awarded (the map must be completed 2 years after adoption of the Recovery Act--February 17, 2011--though, as noted, the awards must be completed by the end of fiscal year 2010).
In my April post
, I argued that Wholesale INfrastructure Supply projects ("WINS") were the best way for the agencies to allocate discretional grants in the allotted time, because allocating grants to wholesale infrastructure providers allows the agencies to transfer the even-more-difficult job of identifying unserved, existing demand to the most efficient prospective suppliers. The attempt at creating my own acronym was, admittedly, weak (like, "wow-that's-weak" weak), and maybe the idea itself was obvious--but even "obvious" good ideas are not always embraced by the government.
This is why I really think the NTIA got it right by allowing itself a lot of discretion to fund "broadband infrastructure projects" (without any more specificity), and then by pushing more funds into wholesale-oriented projects. Multi-party, combination wholesale/retail ("middle mile"/"last mile") projects benefit from the ongoing incentives of the wholesale provider to: 1) stimulate output by seeking out new wholesale customers, as well as 2) monitor its retail partners success in increasing and promoting retail penetration. These projects offer the promise of being easier to "generically" identify and to police on a forward-looking basis than more "unique" projects.
Continue reading First Round of BTOP Grant Awards Show Some Solid "WINS"
July 13, 2009 9:25 PM
After reading the NTIA Broadband Mapping Notice of Funding Availability ("NOFA"), it's clear that the "treasure map" I was hoping for isn't going to materialize. However, I'm not destroyed, because--relative to my expectations, the NTIA--with one really weird exception, and another, more minor, nit--didn't do so bad at all, especially for having a limited amount of time and no confirmed leader until less than a week prior to the NOFA being released.
OK, to get us all on the same page, Congress told the NTIA to come up with a broadband inventory map when it passed the American Reinvestment and Recovery Act ("Recovery Act") earlier this year. Prior to passage of the Recovery Act, though, Congress also instructed the Commerce Department (NTIA) to collect very similar data, and instructed other federal agencies to collect different, relevant broadband-related data, in the 2008 Broadband Data Improvement Act ("BDIA").
Both laws, essentially, seek the same thing--a static inventory of broadband availability in America. The NOFA requires periodic updates, so "static" isn't an entirely fair characterization, but it's not that far away. "Backward-looking" is probably a more accurate characterization. The ultimate "purpose" of the map can be as obvious (and useful) as just letting policymakers know who still needs access to broadband service. Another good use of the map/data is to provide feedback on whether policies are working. More importantly, though, the mapping data can be even more helpful to broadband penetration and deployment if it helps to eliminate information gaps/inefficiencies that prevent forces of supply and demand from working as they should. A broadband map that helped to facilitate this intermediation function would easily pay for the $350 million allocated for the map.
Continue reading Broadband Mapping NOFA: "NOFA" Enough, But Not "BADFA" A First Try
February 16, 2009 5:53 PM
Whaaat? Isn't this blog supposed to be about telecom policy? The title of this post is from a poem by the same name originally written by Herbert S. Bailey, Jr. and published in 1975. The poem is familiar to many, because it has found its way into successive editions of a very commonly used finance textbook. However, when I was doing an exercise in policy issue forecasting last year, these words popped into my head, as (regrettably) a good way to read and predict government actions in the telecom policy arena. So, read the poem - it's a good parody of "The Raven" by Edgar Allan Poe--but just keep the title in mind; it'll be a frequent source for getting some of the material you'll see in this blog. Call it "street" political science!
Continue reading Quoth the Banker, "Watch Cash Flow"
Here's a short counter-example from earlier this week, and it has to do with a timely issue - the stimulus package. The language below is verbatim from the Conference summary report on the Energy and Commerce provisions on broadband in the American Recovery and Reinvestment Bill of 2009: