Thursday, May 05
U.S. Broadband and ICT Sector Adds More than $1 Trillion in Annual Value for the American Economy under Light-Touch Regulation
Report authors Hassett and Shapiro argue that the broadband/ICT sector has grown dramatically under light regulation, and increased regulation could slow Internet ecosystem investment and impair other sectors that depend on broadband/ICT technologies
For the past decade, the broadband and information and communications technologies (ICT) sector has fueled enormous growth and development in the American economy, according to a new 20-page report from the Internet Innovation Alliance (IIA) that analyzes broad trends in the economic value, output, and employment in this key sector. The study concludes that the Federal Communications Commission’s (FCC) effort to impose Title II regulation on broadband providers could “adversely affect broadband/ICT sector investment, with potentially significant secondary costs for the other industries that depend on it and the overall American economy,” the study states.
Authored by Kevin A. Hassett and Robert J. Shapiro, “The Impact of Broadband and Related Information and Communications Technologies on the American Economy” highlights how steady demand for the broadband/ICT sector’s goods and services has helped spur U.S. employment and GDP growth over the past decade. Principal findings of the research include:
• In 2014, the U.S. broadband/ICT sector produced $1,019.2 billion in value added for the American economy, equal to 5.9 percent of U.S. GDP of $17,420.7 billion in 2014. “This substantial share of all U.S. economic value added has been roughly stable for the past decade and likely understates the sector’s full contribution by undervaluing technological improvements,” the paper explains.
• The use of U.S. broadband/ICT goods and services by U.S. private industries, and the information sector (and government), contributed an additional $692.0 billion in output in 2014, equal to 2.7 percent of their combined output and 4.0 percent of GDP. Including the government sector, the use of U.S. broadband/ICT goods and services by other industries and sectors contributed $843.3 billion in output in 2014, equal to 2.9 percent of their combined output and 4.8 percent of GDP.
• The companies that comprise the broadband/ICT sector employed 4,933,000 workers (full-time equivalents or FTE) in 2014, or 4.2 percent of all U.S. private employment and 3.5 percent of all non-farm employment. Demand by the broadband/ICT sector for goods and services produced by other industries was responsible for an additional 2,784,683 jobs (FTE) in 2014. All told, the broadband/ICT sector was responsible for 7,717,683 jobs (FTE) in 2014, or 6.4 percent of all U.S. private employment and 5.5 percent of all non-farm employment.
• The average compensation of broadband/ICT sector workers in 2014 was $104,390, 59.3 percent greater than the average compensation earned by other U.S. workers ($65,517).
“The large economic gains associated with the broadband and ICT sector have flourished in an environment of light federal regulation,” commented Hassett and Shapiro. “The FCC’s proposed regulation of broadband ISPs and their service offerings would stifle broadband/ICT sector investment, growth and employment, negatively impacting the American economy.”
“Today, high-speed Internet is the backbone for 21st century economic growth in the digital economy,” said Rick Boucher, a former Democratic congressman who chaired the Energy and Commerce Subcommittee on Communications and the Internet and now serves as honorary chairman of the IIA. “Unnecessary price regulation in competitive broadband markets will have far-reaching negative impacts on U.S. economic growth and development. Without ample investment in modern networks, consumers and the entire broadband ecosystem – from Internet Service Providers (ISPs) to edge providers – will suffer from reduced innovation and fewer cutting edge broadband services, as well as reduced jobs and economic growth in the nation’s Internet economy.”
DOWNLOAD THE STUDY
Thursday, December 17
Early this week, we released an updated version of our 10 Ways Broadband Saves You Money research. In it, we found the average household can save an average of $11,944 per year on spending by using the Internet. You can find an infographic with our findings, along with the methodology used, here.
Tuesday, November 10
A new paper from Anna-Maria Kovacs, Ph.D., CFA published by the Georgetown Center for Business and Public Policy makes a convincing case that the FCC can save hundreds of millions of taxpayer dollars as it reboots Lifeline for the broadband age.
The full paper, “Regulation in Financial Translation: Rebooting Lifeline for Broadband,” is available for download, but here are some highlights:
The FCC’s FNPRM states that the FCC seeks to make the program more efficient by “targeting support to those low-income consumers who really need it while at the same time shifting the burden of determining consumer eligibility for Lifeline support from the provider. We further see to leverage efficiencies from other existing federal programs and expand our outreach efforts.” An effective way to accomplish this goal is to link Lifeline to SNAP [Supplemental Nutrition Assistance Program] for eligibility verification and enrollment.
As Kovacs points out in the paper, reducing waste, fraud and abuse of the Lifeline program is important. But just as important is ensuring those reduction efforts aren’t duplicative. Again, from the report:
As the FCC’s FNPRM indicates, the job of verifying that households have low-income is already being verified by other federal agencies. Most notably, the USDA verifies the eligibility of those households that quality for SNAP. SNAP not only enrolls those households whose low income qualifies them, but de-enrolls them if their income rises. In other words, SNAP already does the job the FCC duplicates at a cost of roughly $600 million. Thus, the first argument for relying on SNAP for eligibility verification is that doing so would save roughly $600 million in wasted administrative efforts.
$600 million is obviously a lot of savings. But as Kovacs goes on to note, the benefits of linking Lifeline to SNAP go beyond the monetary because:
It would provide automatic enrollment for low-income households that need Lifeline, and make it easier for them to apply the discount to the technology and provider of their choice. By making it easier for both providers and low-income households to participate in Lifeline, the FCC would also enhance competition.
For more on rebooting Lifeline for the broadband age, check out this op-ed from our Honorary Chairman Rick Boucher that was recently published in The Hill. An excerpt
With bipartisan support in Congress, the FCC now has a unique opportunity to completely overhaul and reshape the program for the 21st century. The central challenge is to add broadband as a Lifeline benefit without a significant increase in program costs. Tinkering with the existing program or making minor modifications to program administration at the edges will likely fail to deliver the promise of ubiquitous and modern high-speed broadband access for low-income consumers.
Tuesday, November 03
I am always encouraged by the ways in which technology is improving the classroom experience for students around the country. Through network-enabled devices and high-speed broadband, students and their teachers are able to harness all the Internet has to offer, including apps and content sources that can improve educational outcomes and open doors of opportunity throughout the country.
Both in school and out, students are using mobile devices and the digital economy to explore new ideas and prepare for successful futures. Innovation in the technology industry has jump-started this introduction of technology into the educational experience for millions of students, and it is always worth pointing out some exciting examples of how technology is being put to use for educational innovation.
Just last week, Discovery Education and DirecTV joined the Environmental Protection Agency (EPA) to celebrate National Energy Awareness Month and ENERGY STAR® Day. This event was great. In addition to bringing students in to meet with EPA Administrator Gina McCarthy in person, the three organizations teamed up to provide a “virtual field trip” to schools around the country, which allowed them to tune in to watch the event remotely. By infusing technology into the event, more students not only watched the conversation, but joined it, bringing unique perspectives and questions from around the country.
Events like this show how important innovation in the technology sector is and why we need to continue to make the right kinds of regulatory and legislative choices that allow all players in this innovative industry to provide critical solutions and new offerings. Working together we can avoid false choices between arbitrary winners and losers. Just recently, the Progressive Policy Institute (PPI) released their annual “Investment Heroes” report that showed that the technology industry was leading the pack when it comes to investments in America. As the EPA’s “virtual field trip” shows, this innovation is already changing educational models for the better, which has ripple effects throughout the economy.
While the PPI report illustrates the dollars being invested in the economy, the underlying story may be more important. These dollars are also investments in America’s students, schools and education system. When we deliver new tools and services to schools to open students’ eyes to the world around them, we are able to better prepare them for tomorrow’s workforce, giving them the skills they need to compete on a global scale.
Last week’s “virtual field trip” event sought to engage students in a conversation about being good stewards of the global environment. It is another great example of how technology solutions can be deployed to expose students to new ways of thinking about the world around them. The more we can innovate and deploy these kinds of solutions and ideas, the better off America’s students will be.
Monday, August 31
Today, IIA delivered a filing to the FCC urging the Commission to embrace fundamental and sweeping reform as the agency moves forward in its effort to modernize the existing federal Lifeline Program.
It is our strong belief that only a “sea change” in the program’s current design will advance the goal of creating a 21st Century program capable of efficiently and effectively delivering broadband Internet technologies and meaningful opportunities to America’s low-income consumers.
“The time for bold action is now. As Commissioner Clyburn aptly noted, Lifeline reform gives us a unique opportunity to ‘rid us of antiquated constructs’ and ‘design a future-proof program that enables low-income consumers to have access to broadband services comparable to everyone else.” — IIA Honorary Chairman Rick Boucher.
Beyond making broadband an eligible Lifeline service, we urge the FCC to squarely address existing structural flaws that today hamstring the program and the Lifeline marketplace. We propose that the Commission move swiftly to adopt the following essential reforms:
1. Safeguard the Lifeline Program by taking eligibility determinations away from self-interested service providers.
In its comments, IIA enthusiastically supports the FCC’s proposal to remove the responsibility of consumer eligibility determination from Lifeline providers. IIA points out that determining eligibility for receiving benefits from a government program is an inherently governmental function; as such, eligibility determinations should not be left to service providers that may have improper economic incentives to increase enrollment.
2. Simplify and protect the Lifeline Program by vesting administration in a state agency using a “coordinated enrollment” and de-enrollment process.
IIA supports relying on state governmental agencies as the neutral entities charged with using a coordinated enrollment process to verify consumer eligibility and administer the enrollment and de-enrollment processes. Under this process, consumers determined eligible to receive Supplemental Nutrition Assistance (SNAP) by the State would automatically be deemed eligible to receive Lifeline assistance. IIA believes that a reformed federal Lifeline program should link eligibility determination to a single, mature assistance program – SNAP – which would increase administrative efficiency, promote participation by both consumers and service providers, and reduce the potential for waste, fraud, and abuse.
3. Empower consumers and promote dignity with a “Lifeline Benefit Card” – a direct-to-consumer benefit.
To preserve and advance the personal dignity of Lifeline beneficiaries, IIA believes that Lifeline Program benefits should be transferred directly to the consumer using a “Lifeline Benefit Card” or similar approach (e.g., coordinated enrollment taking advantage of existing SNAP EBT cards and adding the Lifeline benefit to that EBT card). Eligible consumers could use the “Lifeline Benefit Card” as a voucher to buy whichever communications service meets their needs from authorized and registered providers, whether broadband, wireline, or wireless voice service (on a stand-alone or bundled basis).
4. Incentivize voluntary participation in the Lifeline Program by cutting red tape.
IIA recommends delinking the ETC designation from the Lifeline Program so subsidy recipients receive the complete benefits of robust competition that full service provider participation could offer. Removing existing regulatory roadblocks will make it easier for service providers to participate in Lifeline and incentivize them to compete for the purchasing power of Lifeline consumers.
To read our full filing to the FCC, visit here.
Wednesday, July 08
Earlier today, the Media Institute released its “Net Vitality Index In Detail” report, which is a data-heavy companion to its report from April this year called “Net Vitality: Identifying the Top-Tier Global Broadband Internet Ecosystem Leaders.” For those who like to wonk out on broadband stats — which we definitely do — both reports are worth digging into. From the press release accompanying the new report:
Harvard Law School faculty member and Media Institute Global Internet Freedom Advisory Council member Stuart N. Brotman authored both reports. He compiled the detailed data released today for the benefit of scholars, researchers, and policymakers who desire an in-depth look at the metrics used in assessing the broadband Internet ecosystem capabilities of countries around the world.
Based on five years of research, the Net Vitality Index is the first holistic analysis of the global broadband Internet ecosystem, identifying the United States, South Korea, Japan, United Kingdom, and France as the top-tier leaders. Unlike the one-dimensional rankings that serve as the basis of most broadband comparative studies, Brotman’s composite analysis takes into account 52 indices developed independently to evaluate countries on an apples-to-apples basis. Overarching categories assessed encompass applications and content, devices, networks, and macroeconomic factors.
The new detailed report is a treasure trove of data. Some highlights:
• While Windows 7 still dominates when it comes to personal computer operating systems, both Android and Apple’s iOS rank in the top 5 — which is pretty incredible given both operating systems are less than a decade old.
• Surprisingly, at 56.4%, the United States ranks 13th when it comes to smartphone penetration. The leader? The United Arab Emirates at 73.8% penetration.
• The United States continues to domination when it comes to investment in telecommunications, more than doubling the dollars invested by China over the same time period.
• When it comes to mobile app development, the United States is the leader of the world, with the vast majority of apps dominating the charts globally having been developed by U.S. companies.
• Nine of the top 10 digital startups globally are based in the United States.
The Media Institute’s April report “Net Vitality: Identifying the Top-Tier Global Broadband Internet Ecosystem Leaders” is available here. The “Net Vitality Index In Detail” report is available here. Happy reading!
Thursday, May 14
The Multicultural Media, Telecom and Internet Council (MMTC) has assembled an impressive list of co-signers for a letter to the FCC encouraging the Commission to rapidly and comprehensively reform the Lifeline universal service program for the digital age. An excerpt from the letter:
Success in upgrading this 30 year-old program will require policy makers to embrace a new approach. Commissioner Clyburn outlined her thoughts on the subject in a 2012 speech at the American Enterprise Institute referencing immediate Lifeline reform where she stated that reform must occur in a manner that, “…increases the value of other federal investment, reduces administrative burdens, reduces incentives for waste, fraud and abuse, addresses privacy concerns of consumers, streamlines the program to encourage participation and leverages efficiencies from other programs.”
On behalf of the constituents that entrust our organizations to ensuring parity in telecommunications services and other public benefits, we believe that the Commission has the tools necessary to create a new twenty-first century model for the Lifeline program that would serve the needs of low income consumers in an efficient, secure and respectful fashion.
You can read the MMTC letter, which includes its recommendations on how best to reform Lifeline, at the FCC’s website. And for more on the subject, check out our white paper “Bringing the FCC’s Lifeline Program Into the 21st Century.”
Tuesday, November 25
Bret Swanson of Entropy Economics (and one of our Broadband Ambassadors) has put together a new study for the American Enterprise Institute showing that despite claims from those who wish for the government to heavily regulate broadband providers, the U.S. broadband market is actually quite healthy. The full study is definitely worth digging into, but below are some of Swanson’s key points:
• Internet traffic volume is an important indicator of broadband health, as it encapsulates and distills the most important broadband factors, such as access, coverage, speed, price, and content availability.
• US Internet traffic is two to three times higher than that of most advanced nations, and the United States generates more Internet traffic per capita and per Internet user than any major nation except for South Korea.
• The US model of broadband investment and innovation—which operates in an environment that is largely free from government interference—has been a dramatic success.
• Overturning this successful policy by imposing heavy regulation on the Internet puts one of America’s most vital industries at risk.
You can read Swanson’s full report, titled “Internet traffic as a basic measure of broadband health,” over at the American Enterprise Institute.
Tuesday, August 05
Over at The Huffington Post, Kristian Ramos — self-described “tech nerd” and one of our Broadband Ambassadors — writes about the new study from Anna-Maria Kovacs released last week. An excerpt:
Expanding consumer options and preferences has forever broken down traditional standalone wire line, wireless, cable and broadcast services. According to Kovacs, 89% of households subscribed to wireless voice by the end of 2013, either by itself or in combination with some supplemental type of wired voice service.
Additionally, 29% of consumers prefer the blend of wireless service with plain old telephone service (with voice capabilities) and 22% with voice over internet protocol. Those figures are corroborated by a recent Pew Research Center study, which shows that as of 2013, 70% of adults had fixed-broadband access from home, a number that rises to 80% when access via smartphone is included. And most notable, are the 38% of consumers who rely solely on wireless.
Given this data it is clear many households are combining some form of fixed broadband (including some forms of fixed wireless) with mobile wireless broadband. All of this underscores the need for a new regulatory network framework based on the recognition of the diversity of consumers and the various choices they have today in a 21st century broadband world.
Check out Ramos’s full piece over at The Huffington Post.
Thursday, July 10
If you’re in DC next week, and like to hear smart people talk about a smart topic, check out this U.S. Chamber of Commerce event. Bret Swanson, one our Broadband Ambassadors, is one of the speakers.
Wednesday, June 11
84%, which is how much Internet traffic Cisco expects to be video in four years. As Marina Lopes of Reuters reports:
Video consumption of the World Cup alone will generate nearly as much Internet traffic as occurred in all of Australia in 2013, according to a new Cisco Systems Inc report that shows growth in Internet traffic is fueled by video.
The report, which says video is expected to grow to 84 percent of Internet traffic in the United States by 2018 from 78 percent currently, raises questions about whether Internet service providers should prioritize traffic, which has become a controversial issue.
“In the future at some point every month is going to look like the world cup month because the consumption just keeps getting bigger and bigger,” said Robert Pepper, Cisco’s vice president of global technology policy.
Often forgotten in the great net neutrality debate is the fact that bandwidth-intensive video is the future of the Internet. And that presents some very real engineering challenges.
Monday, May 05
Also via The Hill, this time from Kate Tummarello and Julian Hattem, the proposed merger of Comcast and Time Warner Cable is scheduled to get some scrutiny from the House:
Lawmakers in the House this week will get their first chance to press Comcast and Time Warner Cable executives on the two companies’ proposed $45 billion merger.
The House Judiciary Committee hearing comes almost exactly a month after the Senate took a look at the merger and is likely to cover similar ground.
Already, Tummarello and Hattem go on to report, a number of members of the Senate have made it clear they’re not too keen on the merger. Which means it’s time to buckle up for a legislative fight.
Friday, March 07
Next week, one of the biggest video games of the year, Titanfall, will be released. Except, as it turns out, in South America. As Kyle Orland of Ars Technica reports:
When Titanfall finally sees its worldwide release next week, South Africa will not be among the countries to get a version of the game. Early this morning, EA South Africa announced via Facebook that it has decided to hold off on a local release after poor Internet performance during the game’s recent beta test. South Africa’s Gamezone reports that local preorders are being canceled both by Origin and area brick-and-mortar retailers.
“After conducting recent online tests for Titanfall, we found that the performance rates in South Africa were not as high as we need to guarantee a great experience, so we have decided not to release Titanfall in South Africa at this time,” the post reads. “We understand this is a disappointment for local fans and will keep fans posted on any future plans regarding the release of Titanfall in South Africa.”
Interestingly, the video game’s online servers are powered by Microsoft’s cloud service, Azure, and the closest data center to South Africa is in Brazil. While missing out on a video game is no big deal in the grand scheme of things (unless you were excited to play it), Titanfall‘s absence in South Africa highlights the challenges involved in building an international product that is dependent on a robust Internet infrastructure.
Wednesday, February 19
There’s nothing like a little international competition to motivate action. Take Sputnik. Or JKF’s “missile gap.” Or Finland’s recent schooling of the time-to-watch-from-the-sidelines Olympic hockey team.
The battle over global broadband offers a prime example, Washington-style. Many broadband boosters here in our nation’s capital lament a Bandwidth Gap with other nations, including many in the European Union. Some have even suggested that Europe offers the best model for future American broadband policy.
It is worth observing, however, that many European experts disagree. For example, in September European Commissioner for the Digital Agenda Neelie Kroes lamented:
The world envied Europe as we pioneered the global mobile industry in the early 1990s (GSM), but our industry often has no home market to sell to (for example, 4G). Consumers miss out on latest improvements or their devices lack the networks needed to be enjoyed fully. These problems hurt all sectors and rob Europe of jobs it badly needs. EU companies are not global internet players… 4G/LTE reaches only 26% of the European population. In the US one company alone (Verizon) reaches 90%!”
This Battle of the Bandwidth is nicely highlighted in a new report from AEI’s Roslyn Layton that focuses on the important contrasts between European and American broadband policy. Those differences are profound, focusing on incentives for private investment. Only 2% of European households subscribe to Internet services offering connections faster than 100Mbps, according to the EU’s 2013 Digital Agenda Scoreboard. While Europe’s share of broadband investment is less than 20%, the U.S. attracts 25% with a smaller population — per capita investment here is double that in Europe. The EU estimates that it faces a shortfall of €110–170 billion ($150–230 billion) by 2020 if it is to reach its connectivity goals.
In America that money is being put to work, most aggressively by those facing the least legacy regulation, such as IP networks, cable networks and wireless. Such light-touch regulation has fueled robust intermodal competition in the development and deployment of next-generation broadband networks to satisfy a seemingly bottomless consumer appetite.
Those who criticize the state of broadband in our nation typically focus only on one technology, fiber to the home, and choose to ignore the vibrant intermodal competition — such as cable, wireless — that has delivered cutting edge broadband services that are available to millions of Americans, yet largely unavailable to Europeans.
Some criticize America’s delivery broadband service in comparison to the Nordic countries in Europe. Yet, a closer look reveals that the successes in these countries may actually be a result of having policies that look similar to the policies here at home. As Layton notes, Denmark, a country with high broadband penetration, has demonstrated two keys for success:
1. Technological agnosticism. No one broadband technology is favored over another.
2. Market-led broadband development. The government does not decide which technology citizens should have, nor does it give government subsidies for broadband deployment.
Layton’s right. It’s time to put the “Europe is better” argument to rest. Ultra-fast broadband for everyone sustained and serious levels of investment, enabled by policies that promote investment and competition.
Thursday, February 13
Hmmm… not much happening out there today — WAITASECOND!
Comcast Corporation (Nasdaq: CMCSA, CMCSK) and Time Warner Cable (NYSE: TWC) today announced that their Boards of Directors have approved a definitive agreement for Time Warner Cable to merge with Comcast. The agreement is a friendly, stock-for-stock transaction in which Comcast will acquire 100 percent of Time Warner Cable’s 284.9 million shares outstanding for shares of CMCSA amounting to approximately $45.2 billion in equity value. Each Time Warner Cable share will be exchanged for 2.875 shares of CMCSA, equal to Time Warner Cable shareholders owning approximately 23 percent of Comcast’s common stock, with a value to Time Warner Cable shareholders of approximately $158.82 per share based on the last closing price of Comcast shares. The transaction will generate approximately $1.5 billion in operating efficiencies and will be accretive to Comcast’s free cash flow per share while preserving balance sheet strength. The merger will also be tax free to Time Warner Cable shareholders.
This transaction will create a leading technology and innovation company, differentiated by its ability to deliver ground-breaking products on a superior network while leveraging a national platform to create operating efficiencies and economies of scale.
Comcast and Time Warner Cable are the two biggest cable providers in America, so of course this proposed deal is going to receive heavy scrutiny. As The Hill‘s Kate Tummarello writes:
The deal would bring Comcast’s total number of subscribers to 30 million, with the company gaining 8 million subscribers from Time Warner. But as a part of the deal, Comcast also agreed to sell off systems that serve 3 million subscribers.
Top antitrust lawmakers vowed to examine the acquisition closely.
In a statement, Sens. Amy Klobuchar (D-Minn.) and Mike Lee (R-Utah) — chairwoman and ranking member of the Senate Commerce’s Subcommittee on Antitrust — said they will hold a hearing on the proposed merger.
“This proposed merger could have a significant impact on the cable industry and affect consumers across the country,” Klobuchar said, adding that she will “carefully scrutinize the details of this merger and its potential consequences for both consumers and competition.”
This is going to be a long regulatory battle, so buckle up. The full Comcast statement about the deal is here.
Wednesday, January 29
Last night, President Obama delivered his sixth State of the Union Address. One highlight from his speech was a renewed pledge to connect every school in America with high-speed Internet. As Kevin Fitchard of GigaOm reports:
Last year, Obama announced a program to extend broadband access to 99 percent of schools over four years, and on Tuesday he said the administration is working with the Federal Communications Commission, Verizon, Sprint, Apple and Microsoft to fund such a project. According to the White House, details of these “philanthropic partnerships” will be released in coming weeks and will help connect 15,000 schools and 20 million students with wireless and wireline broadband in the next two years.
The Hill‘s Julian Hattem has more:
FCC Chairman Tom Wheeler said that the commission has made a point to make the program as efficient as possible.
“By applying business-like management practices to E-Rate, we can take steps this year that will make existing funds go farther to significantly increase our investment in high-speed broadband connectivity for schools and libraries for the benefit of our students and teachers,” he said in a statement after Obama’s remarks.
“In the Internet age, every student in America should have access to state-of-the-art educational tools, which are increasingly interactive, individualized and bandwidth-intensive,” Wheeler added.
Friday, January 17
Just before the end of 2013, the New York Times published the article “U.S. Struggles to Keep Pace in Delivering Broadband Service,” a piece that compared broadband deployment in the States with the likes of the Latvian capital of Riga and Seoul, South Korea.
The problem is, the article failed to do justice to the success of U.S. broadband providers in serving customers. It was also misleading in its use of Riga and Seoul as the standard for broadband measurement; the article could as easily have cited Kansas City, with its 1 gigabit speeds, and found the rest of the world to be inadequate in comparison.
Here’s a better gauge of broadband deployment: The National Telecommunications and Information Administration reports that the U.S., despite its vast geography and dispersed cities, has higher average speeds and lower prices than Europe generally. In fact, entry-level broadband pricing in the U.S. is the second lowest globally, behind Israel, according to the International Telecommunications Union.
I wasn’t the only one baffled by the Times’ approach. At this morning’s AEI Tech Policy Summit, Roslyn Layton, Ph.D. of the Center for Communications, Media and Information Technologies — who also lives in Denmark — tackled the Times’ article directly, telling attendees, “I always hear that everything is better in Europe… there are pockets of next-generation service, but it’s hardly a ‘utopia.’”
Layton also highlighted the fact that U.S. broadband investment is two times greater than investment in the European Union, and that, as she put it, “The U.S. is getting one quarter of all the money being invested in broadband networks across the world.”
That’s a lot of investment, and as a result of all that private money flowing into networks, America now has both fixed and wireless broadband systems that are fast, robust, and affordable – all thanks to a light-touch regulatory framework that encouraged some $1.2 trillion in investment since 1996, with billions more expected as more spectrum is made available for wireless broadband. In contrast, Europe’s highly-regulatory, leased access regime has limited broadband infrastructure investment and slowed deployment of next-generation networks.
Riga and Seoul may have faster speeds, but when it comes to deployment of broadband, they’re anomalies rather than benchmarks. Contrary to the inference in the Times’ article, the U.S., with its pro-investment regulatory policy, has eclipsed all of Europe in both network speed and affordability. That’s not a struggle, it’s a success.
Friday, November 22
November 21, 2013 10:13PM ET | Bloomberg BNA
American innovation has led to massive adoption of cutting-edge communications and entertainment technologies. Functionalities and services once wondrous and new are now commonplace. A step back reveals how far and how fast we’ve come. In 2000, television changed forever as TiVO introduced us to time shifting, the ability for consumers to record and watch TV programs at the scheduled hour of their choosing. That same year, our Internet and telephone experience was enhanced as cable modems began to take hold in American homes. The following year, we saw the first iPod, and how we buy, store, and listen to music has never been the same. The iPhone (2007) and iPad (2010) gave birth to a revolution in the use of mobile data.
Unseen but ever-present wired and wireless broadband networks provide the foundation for the high-quality video, voice and Internet services that Americans have welcomed with historic enthusiasm, as they have been adopted by in the home and mobile users at a stunning pace.
During the past decade, under our feet and above our heads, the nation’s broadband service providers have invested tens of billions of dollars to bring high-speed wired and wireless connections to our homes and businesses and in the process have reshaped almost everything about how we communicate. Because of these investments, we constantly have available a seamless stream of voice, data, and video on demand.
Today’s digital networks offer boundless opportunity—boosting economic growth and job creation; through remote monitoring and telemedicine, bringing world-class medical care to remote communities and easing the burden of chronic conditions; improving education for students of all ages by delivering advanced coursework, college classes, and even online degrees through distance-learning programs; maintaining constant communications with business associates, family and friends; and providing entertainment and real-time news, weather, and sports information.
This enhanced connectivity also enables civic empowerment—especially for groups who haven’t always been heard—enabling them to communicate more easily with elected officials and to organize and advocate on their own behalf.
Achieving the next level of broadband investment and enabling faster connections, more capable services and deeper Internet penetration in hard-to-serve areas will be facilitated by policy changes by the FCC. With the commission’s newly arrived leadership, these needed changes should be at the forefront of the agency’s agenda.
While communications of all kinds have rapidly moved to the Internet and broadband networks, the aging copper-wire, circuit-switched telephone network remains in place, using the same technology Alexander Graham Bell pioneered. It offers plain old telephone service (POTS), and Americans are fleeing it in droves at an ever-accelerating pace. Only 5 percent of Americans use the old network as their exclusive communications medium. Another 38 percent use it in combination with wireless service, and most Americans use wireless communications only or rely on a combination of wireless and a wired alternative to the telephone network, such as cable modem service.
We stand at an inflection point where the rules that were sensible in the last century for a heavily regulated circuit-switched telephone monopoly are no longer sensible in today’s competitive communications landscape dominated by broadband and a multiplicity of Internet-enabled services. The requirement of current law that telephone companies spend billions annually maintaining a single-function, aging network that consumers no longer prefer is impeding the next level of broadband investment. Planning and delivering a rapid transition to an all-broadband communications environment is the greatest challenge that the new FCC chairman faces.
A Change Requiring New Policy
In its time, the phone network was a culture-changing technical marvel that introduced nationwide communication through copper wire, erasing geography and reliably enabling Americans to dial business contacts, friends, family, and neighbors anytime, anywhere.
During the early and mid-20th century, access to telephones grew rapidly as government aided and promoted a monopoly to accelerate network build-out to reach all Americans. As telephone service became nearly ubiquitous in the latter half of the last century, technological and market advancements created the possibility for alternative satellite, wireless, and landline communications for businesses and consumers.
Realizing the potential benefits that the array of digital technologies could provide, the U.S. government ended the phone monopoly, and with passage of the Telecommunications Act of 1996, began to chart a course toward more robust competition and entrepreneurship in the nation’s communications marketplace. Consumers were first offered choice in the long distance telephone market. Then new providers, such as cable companies, built out broadband networks to offer competitive wired residential telephone and Internet services. The door was opened for telephone companies to offer cable TV service, and digital networks were developed that could accommodate it.
As the reliability of wireless communications increased and access to broadband services has expanded, American consumers at work and in the home have embraced them with a passion. Modern broadband communications systems now link us to the Internet; move information, data and video at lightning speed; and carry our voice “phone” calls, too. These are the networks consumers prefer, and the transition away from the antiquated telephone network is occurring with remarkable speed. As society now treasures its smartphones and tablet devices, streaming videos, GPS guidance systems, and other electronic wonders, we forget that little more than a decade ago personal communications was still largely about POTS. Current law still assumes that most communications are delivered by the POTS network.
Existing regulations were created in a world where heavily regulated phone companies provided copper wire voice service, lightly-regulated cable companies delivered TV, and wireless companies offered services deemed too unreliable to compete with wired telephone service. In fact, these rules still compel telephone companies to invest nearly $13.5 billion each year to maintain and run the old copper phone system as if it were still the nation’s core communications system used by almost all.
Too Much Investment to Maintain Old Technology
As the number of telephone company subscribers on POTS sharply falls, the per-subscriber cost of maintaining the old network has become unsustainable. According to a recent study, America’s telephone companies made more than $154 billion in capital expenditures from 2006 to 2011. Surprisingly, the majority of that investment was dedicated to maintaining the declining telephone network, even though today only about one-third of Americans still use it at all, and only 5 percent use it exclusively. Every dollar that is spent maintaining a voice-only network that consumers are fleeing is a dollar not invested in the modern multifunction broadband networks that consumers prefer. Every dollar telephone companies spend on an ancient, declining, and little used technology is a dollar not spent developing the more capable broadband infrastructures through which phone companies can become stronger competitors in the offering of voice, video, and data with largely unregulated cable companies. That’s an important goal because when competition is fair and fierce, consumers ultimately win big with competitive pricing and greater choices to fit their personal needs.
Ancient rules and old ways of thinking are undermining innovation, damaging competition, forcing billions of dollars into misdirected capital investment, and slowing our national progress. Maintaining the status quo for the antiquated telephone network—either by decision or inaction—is a costly anachronism. Requiring phone companies to operate voice-only telephone networks while they are building out new fiber-optic broadband networks makes as much sense as requiring a hitching post in front of every store, forcing bus companies to maintain streetcar tracks, or insisting on backup electric fans in every air-conditioned building.
The IP Transition: Six Principles to Consider
The FCC’s 2010 National Broadband Plan is instructive. It observes that the regulations requiring telephone companies to maintain the old phone network “siphon[s] investments from new networks and services” and is “not sustainable.” The report also declares that the transition to “broadband is the greatest infrastructure challenge of the 21st century.” The FCC’s Technological Advisory Council recommended that the transition and sunset of the POTS network be completed by 2018.
That’s not very far away, and meeting that schedule will bring its own unique challenges. Consumers must be protected, and certain populations are at risk of being disadvantaged. Of particular concern are those who are not yet taking advantage of the opportunities created by new digital technologies. For example, late adopters—largely older and less affluent consumers, many of whom reside in hard-to-serve rural areas, who have not yet joined the broadband era—may be at greater risk unless we complete the transition in a carefully planned and orderly way. The transition to 21st century communications networks must serve every American. But that result is not pre-ordained; it will require hard work.
Government must play a key role throughout this process by advancing consumer interests with a transition plan guided by core principles. These basic protections will remain government’s responsibility even after the old phone system is shut down:
1. The commitment to universal service must endure. Next-generation high-speed broadband networks and their benefits must be available to every American. As we move beyond the old phone network, we cannot leave anybody behind. Without dictating specific technologies or micro-managing how communications competitors meet their public service obligations, we must push the envelope to ensure that every American can access modern broadband service and enjoy the benefits that come with it. At a minimum, post transition everybody should enjoy service at least as good as they can now receive from copper-wire phone networks.
2. Public safety must be assured. 911 emergency calls must go through—every single time—no matter what technology or services consumers adopt.
3. Services for the hearing-impaired and those with vision problems also must be retained at levels that at least match what consumers enjoy today.
4. Consumer protection must remain at the heart of communications policy. Consumers must know that government has their back; that service providers will deliver on their promises; that spotty service, fraud, or other abuses will not be tolerated. Consumers must have a place to take complaints with confidence that something will be done about them.
5. Establishing a backup plan for power failures should be part of the transition process. The rebuilding after Hurricane Sandy exposed some potential weaknesses in the way our digital technology works today. While fiber-optic-based systems tolerate water damage that can short out copper wires, they are more vulnerable when the electricity at the user’s premises goes out.
6. Special retrofitting and other creative solutions may be required to ensure that modern networks function fully with personal and business equipment such as fax machines, security systems, health monitors, and credit card readers, even though they may not currently be compatible with today’s broadband connections.
FCC Should Begin Trials Now
Consumer interests are paramount. These core challenges must be met before the book is closed on the antiquated POTS network. Contrary to the claims of some, the post-transition environment will not be regulation free. Indeed, regulation will be necessary to assure consumer protection, but just as networks are modernizing, the regulatory landscape must be modernized as well.
What’s needed is smart regulation appropriate to protect consumers and public safety, promote competition and support universal service, while also encouraging sustained private investment and innovation in America’s next-generation communications networks.
The upgrade and modernization effort will require thought and planning. That’s why we must start now while the existing phone system is available as a “safety net” backup for any potential glitch or surprise that might arise during the upgrade to a new and modern system. No one is proposing a “flash cut” in which the telephone network disappears overnight. This process will, in fact, probably take half a decade to complete.
To take the first step, the FCC should rely on a time-tested method: demonstration projects. Conducting demonstration trials in carefully selected markets in which existing POTS users are rapidly moved to Internet protocol-based networks will provide a controlled environment for an accelerated transition with the existing telephone network still in place as a safety net.
This approach gives consumers an assurance that if any unexpected problems causing consumer disruptions arise, service can continue over the telephone network while technical and service issues are resolved. Through the demonstration projects, we can determine what is likely to go wrong and have solutions in place prior to a broader national transition.
The FCC has a recent successful precedent for taking precisely this step. In the nation’s transition from analog to digital television broadcasting, the FCC conducted a similar test. Leading up to the digital TV conversion, some warned of potential negative consequences for consumers. The warnings were similar to those we are hearing about the transition from POTS to modern networks. In particular, the articulated fear was that switching to digital television broadcasts would harm consumers, particularly the elderly and less technically savvy viewers who decide to keep their older analog television sets but would experience difficulty installing the required converter box to receive and convert the new digital broadcasts. The circumstance of rural and lower income viewers was a particular focus. To address these concerns, the FCC launched a demonstration project in Wilmington, N.C., an area with a wide diversity of viewers, including those with low incomes, the elderly, and viewers living in both metropolitan and rural areas.
The FCC’s Wilmington demonstration project proved a success. It provided clear evidence that on the day analog broadcasts ended, viewers were prepared. There were almost no complaints. Analog television users across the Wilmington region had successfully installed digital-to- analog converter boxes. The trial inspired confidence that the national transition could proceed uneventfully, and on national transition day, very few problems were encountered.
Employing the same model, the FCC should now move quickly to authorize closely supervised demonstration projects in selected markets, perhaps one urban and one rural, where people quickly shift from existing telephone networks to modern broadband networks. The demonstration projects offer a test bed to guarantee that core consumer values will be protected, to learn what may go wrong in a controlled rapid transition and to devise solutions for problems that in fact arise prior to a broader national transition.
While the attraction of broadband networks has propelled a POTS-to-broadband transition that is now well advanced, we owe it to ourselves to plan and complete it on the schedule that the FCC’s Advisory Council recommended. Applying the knowledge gained through demonstration projects we can accelerate the POTS phase-out and realize the benefits of greater network functionality, a broader array of services for consumers and the economic efficiencies that come from devoting investment to the networks of the future rather than the network of the past.
Public-Private Partnership Needed for New Road Map
For the moment we have the luxury of time to conduct demonstration projects, but an additional sense of urgency for action is now apparent. The current telephone network is supported by antiquated equipment, and as consumers have continued their ongoing migration to the new networks, equipment providers either no longer manufacture or have significantly scaled back production of the TDM (time-division multiplexing)-based equipment necessary to maintain and operate the POTS network. As fewer replacement parts become available, maintaining the phone network grows dramatically more expensive, further skewing the ratio between investment in old and new technologies, with the ever-escalating costs being passed on to consumers. All Americans stand to benefit from shifting investment to modern networks that offer consumers service as least as good as what they enjoy today, as well as the greater functionality that broadband networks can offer.
A public-private partnership among all stakeholders—consumers, telecom companies, suppliers, and regulators—will be needed to establish the rules of the road for the new network. These stakeholders can embrace key principles—recently outlined by the leading consumer advocacy organization Public Knowledge—service for all, competition, reliability, consumer protection, and public safety.
Simply providing access to new technology while protecting core consumer values, however, isn’t the whole job. We also must boost adoption rates, educating every American about what the transition means, how it will affect them and how by using broadband they can improve opportunities for themselves and their families. We can’t afford to leave any American in the dark about the value of broadband; we can’t leave anyone behind.
So the real questions surrounding the IP transition are not whether, but when; not if, but how. Bipartisan support exists in Congress for the transition itself and for the basic principles that should be at its core, including consumer protection, universal service, network reliability, competition and public safety. Now is the time for all stakeholders to work together, starting with the demonstration projects, to ensure that the transition’s rapid final phase proceeds as smoothly as possible.
New FCC Chairman Embraces Need for Quick Action
The Internet’s evolution has brought us to another critical juncture in communications policy as we consider how to complete the transition from the bygone era of plain old telephone service to the broadband future of the 21st century. It’s a critical transition, given broadband’s increasingly dominant role in every part of our economy, as well as its ability to improve lives and advance economic growth. It’s also something that just about every stakeholder, including the FCC, regards as inevitable.
In 2011, the Technological Advisory Council led by now-FCC chairman, Tom Wheeler, noted that “[t]he FCC should take steps to prepare for the inevitable transition” from the old network and in fact “take steps to expedite the transition, with a target date of 2018,” including the need to “re-align regulatory requirements to emerging technologies.”
The recommendation reflected vision and foresight then, and provides an ambitious but achievable agenda now. When it’s achieved, Americans will have access to reliable networks designed specifically for broadband voice, video, and Internet services, rather than antiquated networks that support phones wired to the wall. Every app, every smartphone and tablet, every desktop computer will smoothly connect consumers to the online experience of their choice—telemedicine services for better health, virtual classrooms for lifetime learning, their legislators’ offices for civic engagement, a job opportunity, a business contact, a sporting event, a movie, friends and family across town or on the other side of the world. That’s the goal—delivering the services consumers want. Upgrading and modernizing our 20th century telephone networks will get us there.
This goal now appears closer on the horizon than ever before. In one of his first official acts, Chairman Wheeler has made clear the need to speed the “Fourth Network Revolution,” recognizing how “new networks catalyze innovation, investment, ideas and ingenuity.” He stated that “the time to act starts now” and proposed a timetable for FCC action in January 2014 on how to “begin a diverse set of experiments that will allow the commission and the public to observe the impact on consumers and businesses of the [IP transition and proposed demonstration projects].” In setting this course, the new chairman has jump-started the process and appears ready to steer the FCC toward addressing the key policy, technical, and consumer issues necessary to bring 21st century high-speed broadband to more Americans.
In our land of opportunity and innovation, we’re a place of relentless creativity. At the core of our success is an entrepreneurial culture powered by private sector investment. In that American tradition, it’s incumbent on us to ensure that the benefits and opportunities of next-generation networks and services become widespread and available to all. The POTS-to-broadband transition will free the needed investment. The next steps for us to take are now clear.
Reproduced with Permission from The Telecommunications Law Resource Center, Copyright 2013, The Bureau of National Affairs, Inc. (800-372-1033) www.bna.com.
Wednesday, November 13
A new report from Bret Swanson of Entropy Economics (Swanson is also one of our Broadband Ambassadors) looks at the current state of competition in the online space and what that competition means for regulations. Titled “Digital Dynamism: Competition in the Internet Ecosystem,” the report is a lean 20 pages but packed with some startling facts and figures. Some examples:
• Private sector investment in high-speed Internet over the past 15 years amounts to $1.2 trillion.
• As a result of that investment, competition is strong and the U.S. broadband networks rank high globally when it comes to speed, and only South Korea generates more traffic than Americans.
• Due to how dynamic and unpredictable the industry is, top-down regulatory oversight is a major challenge, which highlights the need for a new approach from regulators.
Swanson’s paper also contains a graphic breaking down all the ways communication has changed since 1984. The full graphic is available here, but the image above is worth highlighting. Remember when communication meant phone-to-phone? Well things have certainly changed…
You can check out Swanson’s full report at Entropy Economics.
Thursday, October 17
Earlier today, we held a Twitterview with Wear the Cape, an innovative company focused on inspiring goodness in others through clothing. You can check out the condensed interview via our respective Twitter handles (@iiabroadband, @WtCKids). Here’s the extended interview — IIA.
What is Wear the Cape and what is its mission?
Wear the Cape is dedicated to restoring the power of kindness and good character through hip, inspirational products that create teachable moments and via our non-profit arm the kidkind foundation.
October is National Bullying Prevention Month. How does cyberbullying fit into Wear the Cape’s efforts?
Wear the Cape is focused on preventing bullying by shaping behavior from an early age – kids aren’t born bullies. But cyberbullying is a pervasive issue, particularly among teens. We aim to show teens that giving respect, gets respect – your peers don’t look up to you for mistreating others.
How does Wear the Cape interact with its customers and supporters online?
Wear the Cape utilizes its website to accept donations (100% to the kidkind foundation), sell products (10% of proceeds goes directly to the kidkind foundation, with the remained going toward developing educational materials and furthering the mission), and address issues that families care about via our blog. We’re also active on social media!
Is Wear the Cape dependent on high-speed broadband Internet for building, developing, transforming and/or growing the brand and kidkind foundation?
So far, Wear the Cape is — for the most part –— an online-only organization. Our website is a platform for e-commerce, and we also use it to accept donations. Without fast Internet speeds, consumers would not be able to easily and reliably purchase Wear the Cape clothing and gear or make contributions to the kidkind foundation.
What are some of the web applications that have enabled Wear the Cape’s team to run the business and non-profit arm?
We use WordPress as our blogging platform and Shopify to sell our products and take donations for the kidkind foundation. These two gems enabled us to launch, and Wear the Cape depends on them every day!
How would lack of broadband build-out across the nation affect Wear the Cape’s business model?
People that don’t have broadband are much less active on social media and usually don’t shop online. Wear the Cape relies on social media to help reach people far and wide with our mission, and most of our product sales currently take place at our online storefront. It’s difficult for us to reach and help communities without high-speed Internet.
How can the online users connect with Wear the Cape?
Visit us at our website, and follow us on Twitter, Facebook, Tumblr, Pinterest and LinkedIn! We would love to hear from you.