Universal Broadband

FCC Broadband Coordinator Blair Levin described the crux of the National Broadband Plan in testifying before the Commission 7-02 as "identifying where there are currently 'demonstrable public interest harms.'" That central task is essentially defining the problem(s) and is necessary to complete the last task of the plan: "identifying ways to lessen those public interest harms," or recommending solutions. Defining the problem largely defines the range of recommended solutions.

• The plural use of "harms" here suggests that the Plan could end up "identifying" more problems than the obvious core problem prompting the Plan -- that not "all people of the United States have access to broadband capability."

Levin's choice of a classic organizational structure, background-problem-solution, is a wise, useful, and simplifying approach for such an exceedingly complex endeavor.

Big kudos to George Ford and Larry Spiwak of the Phoenix Center for their innovative breakthrough in devising a rigorous "Broadband Adoption Index" to replace current highly-deficient international broadband comparison methods. 

• Last Wednesday, I attended the presentation of their paper before a largely government audience in Washington and came away very impressed with their clarity of thought and the vastly greater utility of their approach over existing comparative mechanisms.

First, George Ford drove home the point that the much-touted OECD broadband penetration ranking was fatally flawed, in that even if the U.S. reached perfect 100% penetration the U.S. could remain in about 15th place.

Pat Brogan of USTelecom and Evan Leo of Kellog Huber have produced an outstanding new report on special access that is the single best and most up-to-date survey and analysis of publicly available information on the status of competition in the special access market. 

At core, Congress has asked the FCC to recommend to Congress HOW "to ensure that all people of the United States have access to broadband capability." Arguably the FCC's main "fork-in-the-road" decision in developing its National Broadband Plan is whether to recommend to Congress to:

• Re-affirm the current competition vision/law/precedent for broadband policy and build upon the strong foundation and momentum of facilities-based competition in the marketplace? or
• Design the more Government-centered broadband ecosystem policy recommended most prominently by FreePress/Open Internet Coalition members, and re-build the common carrier regulation regime of the twentieth century?  

What engine of choice will the FCC recommend to Congress: 

• Competitive forces and private investment? or
• Government forces and taxpayer money?

In other words, will the FCC:

The supreme irony of the special access* issue is that competitors, who want to avoid investing in next generation broadband access facilities, are demanding that the FCC... (whose top priority is a National Broadband Plan to encourage the rapid build-out of modern broadband facilities to all Americans) ...regulate copper access prices in a way that surely would discourage investment in the exact next generation facilities that the FCC wants to get built.

• * "Special access" is basically the business-to-business leasing market of the copper wire connections that link many buildings and cell towers to the Internet backbone at DS1 (1.5 Mbs) and DS3 (44.7 Mbs) speeds.
• Bronze is 90% copper and 10% tin.

Scott Wallsten of the Technology Policy Institute issued an informative and insightful report on the many international broadband measures out there; I recommend reading it if you are interested in the subject. 

I particularly liked the new data on how broadband is used that shows that the U.S. has the highest:

• Digital share of recorded music sales of surveyed OECD nations;
• Sales of online films; and 
• Online TV and video revenue per head. 

I liked these new measures because they begin to expand this discussion to how broadband is used and how people benefit from broadband rather than just a sterile and not very useful debate over broadband penetration.

• Broadband is a means not an end. 
• What it enables is what is important.  

Scott's report does a very good job at showing the vast richness of different ways international broadband comparisons can be made. It adds a lot of value to the ongoing debate over where the U.S. stands internationally on broadband.  

What do the Administration's new "NOFA" guidelines, which implement the $7.2b broadband stimulus package, tell us about the trajectory for broadband and net neutrality policy going forward? 

• If one listened to just the public comments of net neutrality proponents one would miss a lot of important substance and clues about where broadband and net neutrality policy may be going, given that these new grant guidelines/conditions are the first major official broadband guidance stemming from the new Congress and the new Administration.

What do we know now that we didn't know before the release of the NOFA guidelines?

I. The Administration implicitly rejected extreme net neutrality.

The grant conditions strongly rejected the extreme net neutrality position of the tech elitists: (FreePress, Save the Internet and the Open Internet Coalition) that any bit interference is de facto discrimination.  The Administration substantially limited what could possibly constitute Internet discrimination by substantially expanding the number of exceptions to the FCC's Broadband Policy Statement as it applies to these broadband grants.

The DOJ has opened an initial review of the telecom industry, per WSJ reports, as part of the Obama Administration's and the Varney Antitrust Division's "aggressive stance on antitrust enforcement."

Antitrust enforcement is fact-driven, since it ultimately must be proven in court. The competitive facts in the telecom industry will speak for themselves; the industry is clearly and overtly competitive and trending more competitive. 

This review will not be difficult or take long since the DOJ has vast and deep experience with the U.S. telecom industry -- having overseen the AT&T Consent Decree 1984-1996, been intimately involved with the drafting and implementation of the 1996 Telecom Act including the detailed development of local competition and Bell entry into long distrance. The DOJ also has reviewed and approved a number of telecom mergers over the last several years, most recently the approval of Verizon-Alltel and Centurytel and Embarq.

• It is important to note that the scrutiny standard of approving a merger is a dramatically tougher standard than that of a Sherman antitrust action.
• Generally as a rule of thumb, the DOJ prevents proposed mergers that would create combined market share of over 30%, while the market share standard to prove a Sherman antitrust case generally requires at least a 50% share and more likely 70-90% share.    

Moreover, the DOJ will examine the telecom marketplace to see if it exhibits the core characteristics of a competitive market:

Handset marketing exclusives are a pro-competitive wellspring of wireless growth and broadband adoption. Marketing exclusives are also a legitimate, proven and widespread marketing practice that marshals maximum marketing resources for selected, potentially-hot-new-products in order to drive maximum sales and adoption.

Comcast-Clearwire's 4G WiMax rollout starting in Portland today, as part of broader national launch this year, is powerful evidence of the vibrancy and dynamism of the facilities-based broadband competition trajectory in the U.S.

• This latest announcement provides an excellent opportunity to take stock of both the current state of broadband competition in the U.S. and the competitive trajectory of how the U.S. broadband market is getting increasingly more competitive.

Contrary to the parade of imperfection horribles claimed by anti-competition groups to try and justify a wide variety of new net neutrality-related regulations, the U.S. has more real and growing facilities-based broadband competition than any nation in the world.

The Comcast announcement provides powerful proof points of all the good aspects of vibrant facilities-based competition.