Sunday, January 10, 2010

The Star Trek Guide to the National Broadband Plan

“To boldly go.” There may be no more famous split infinitive than the one used to introduce the voyages of the starship Enterprise through the more than 40-year history of the Star Trek franchise. Whether it was “to boldly go where no man has gone before,” in the original series, or “to boldly go where no one has gone before,” in the Next Generation, the sentiment was clear. Bold is better.

When Barack Obama was campaigning for president, the tech sector was all atwitter (you should pardon the expression) about a campaign and policy staff that seemed to get it. Candidate Obama said all the right things, and now, President Obama has reaffirmed his commitment to an open Internet. There is the vision and the capacity to reach for a greater goal, and we have every right to expect it. The Federal Communications Commission’s (FCC) Net Neutrality rulemaking is one example of a bold stroke, so we know that it can be done.

The National Broadband Plan is no different. In the last few days, we have a promise from Federal Communications Commission (FCC) Chairman Julius Genachowsky that the National Broadband Plan will be “bold.”

The National Broadband Plan requires a bold stroke. It requires more than a narrow view of “the art of the possible.” It is not possible to grow corn, for example, simply by looking at a plot of land. Put some seeds in and some water, and the “art of the possible” changes. Now that the FCC has requested some more time from Congress to submit its plan, it can work on redefining what it considers to be “possible,” choosing from a couple of scenarios.

Nothing illustrates the choice between a safe, incremental plan that will do some modest good and a bold stroke that could genuinely take this country back to digital leadership than two studies prepared for the FCC.

Two Studies, Two Visions

One study was done by the Columbia Institute for Tele-Information (CITI), called Broadband In America, which was supposed to an independent analysis of publicly announced broadband network deployments. It presented what might be termed a “rosy scenario” about the state of play today. The report found “that by 2013‐4, broadband service providers expect to be able to serve about 95% of U.S. homes with at least a low speed of wired broadband service and they expect to offer to about 90% of homes advertised speeds of 50 mbps downstream,” with those increases in speeds coming by 2012. In addition, “economically sustainable deployments are largely in place and will be completed within the next 3‐5 years when availability reaches 95% of households. Most new investment will be spent on increasing broadband capacity and speed in currently served areas,” the report said, adding that “wireless broadband service providers expect to offer wireless access at advertised speeds ranging up to 12 mbps downstream (but more likely 5 mbps or less due to capacity sharing) to about 94% of the population by 2013. In addition to several wireless broadband choices, the majority of American homes will have the choice of two wired broadband services.”

The information for this study came from industry analysts, news reports and trade associations. “Consequently, we did not develop independent data or evaluate the validity of the data reported by the service providers and we did not use academic, government or other studies regarding the state of broadband that have already been made available to the FCC staff,” the Columbia report noted.

The second study, Next Generation Connectivity, was a bit more ambitious. This report from Harvard’s Berkman Center for Internet and Society, looked at the state of U.S. broadband compared to the rest of the world. Compared to the rest of the world, “the U.S. is a middle-of-the-pack performer on the core relevant outcome metrics: penetration, speed, and price,” this study found. How did this group reach its conclusion? “Our benchmarking report relies on diverse sources of data; refers to households as well as per capita and mobile penetration, and includes speeds and prices. Since the comment period, we have added additional data sources for speed and price, further deepening our study and increasing our confidence in the result.”

This study started with well-known and accepted data from the Organisation for Economic Co-operation and Development (OECD), which “collects and reports household penetration statistics from the respective national statistics agencies, reflecting household survey data.” To determine how fast U.S. Internet connections are, the study did its own speed tests: “Using 41 million actual tests from Q4 2008, we identified the U.S. as ranking 11th among OECD nations in median download speeds.” They also found that “when we looked at speeds in the capitals and largest city in each of the OECD countries, New York and Washington were not among the top 20 in download speeds, despite their high urban density.” They did their own pricing studies, concluding that “U.S. prices are very good by international standards at the very low speeds, around 768kbps, but become more expensive at contemporary broadband speeds above 1.5Mbps. By the time we reach offers for speeds that are high or very high (above 10Mbps), U.S. broadband prices are substantially higher than elsewhere, reflecting the highest prices for the speeds closest to what we anticipate will be typical of next generation networks.”

The the Harvard report also made policy recommendations, where the Columbia report did not: “Relying on fourteen country case studies focused on political economy and firm-by-firm analysis, we found that open access policies played a substantial role in generating competitive markets in many countries and that regulators see these policies as a substantial part of their toolbox when they come to plan the next generation transition.” Entrepreneurs bought access to existing networks through line sharing and brought their own services that complemented those offered by network providers.

Two Policy Directions for the FCC

Those are two different views of the world, and a stark choice between the safe incremental approach and the bold transformative approach. The plans being discussed so far reflect the Columbia approach. A presentation made in December to the FCC by Blair Levin, who is heading up the broadband plan effort, dealt with the already-accepted idea of converting universal service to support broadband, and rights-of-way issues, concentrating on affordability and utilization, along with fixing up set top boxes. and finding more spectrum to meet increasing demand.

These are good things, and safe things, but not bold things. Everyone has agreed for years that we need to reform universal service, and even the cable industry has agreed in principle to reexamining the set top box rules. And while going after broadcaster spectrum may seem a bit risky, this recommendation rests on the now popular view of a looming “spectrum crisis.”

When a number of public interest groups, including Public Knowledge, criticized the plan as presented on Dec. 16 as insufficient, Levin said our comments were “not productive.” Levin told the Wall Street Journal he isn’t interested in bringing back line sharing: “As to (line sharing rules), the courts threw that out and we’re not that terribly interesting in moving toward things that will just freeze capital investment and have long, drawn-out court battles.”

Recent comments by the Department of Justice underscore the need to take the bold path of the Harvard study rather than the safe path outlined by CITI. The DoJ recognized the National Broadband Plan should work to increase competition.

Language endorsing competition is a big change for the Justice Department from recent years, and they should be commended for recognizing that existing broadband markets aren’t competitive. At the same time, DoJ didn’t say how that competition should be achieved. It endorsed freeing up more spectrum, as did NTIA, but neither agency said how more spectrum would create more competition, particularly if big incumbents buy spectrum at auction without any open-access requirement.

One of the advantages cited by the Harvard study of line sharing policies was that it stimulated competition and investment for those countries that adopted and enforced these policies. But adopting the Harvard recommendation means having the audacity to put out something genuinely new, something certain to attract industry backlash, and which will require bold leadership and enormous audacity to see it through. By contrast, relying on the CITI report means adopting policies that will help industry incumbents with their announced roll out plans. That may speed broadband deployment in some areas — a worthy goal — but it won’t bring the competition the DoJ finds critical to maximizing consumer value, innovation and investment.

Genachowski has promised us a bold plan. We need boldness. That’s why Congress demanded this plan. Hopefully, Genachowski will embrace boldness of the Harvard recommendations and the risk that goes with it, rather than the tempting safety of the CITI.