“The Impact of Title II Regulation of Internet Providers On Their Capital Investments” is a 22-page study penned by economists Kevin A. Hassett and Robert J. Shapiro. It was submitted to the FCC as part of an ex part by the US Telecom Association. If you care about the future of the Internet, you need to add it to your reading list.
For the study, Hassett and Shapiro approached the question of Title II reclassification armed with numbers. Specifically, an alarming drop in projected private investment should the FCC choose to reclassify. As the economists write:
If the status quo continues, with data services unencumbered by Title II regulation, the several ISPs in our sample are expected to spend approximately $218.8 billion in new capital investments over the next five years in their wirelines and wireless networks. In contrast, under Title II regulation of all wireline data services, these ISPs’ wirelines and wireless capital investments over the next five years would drop an estimated range of $173.4 billion to $190.7 billion. Title II regulation of ISPs thus reduces these companies’ total investments by $28.1 billion to $45.4 billion (between 12.8 percent and 20.8 percent) over the next five years. Wireline investment by these firms would be 17.8 percent to 31.7 percent lower than expected.
That’s a lot of numbers with the word billion attached, but the main focus should really be on the percentages. You don’t have to be an economist to realize that a reduction of total investment dollars of 12.8 percent to 20.8 percent (and wireline investment dollars of 17.8 percent to 31.7 percent) would have a profound effect on America’s communications infrastructure. And by profound, I mean decidedly negative — not just for network expansion and upgrades, but for innovation across the Internet board.
The blow to innovation, Hassett and Shapiro argue, would be particularly hard on wireless networks. Again, from the study:
[T]he network managements practices which Title II regulation would potentially bar enable wireless investment and innovation, because wireless networks face serious capacity constraints. Thus, regulations that discourage or bar those practices raise the risk of introducing new products and applications: Without those practices, carriers would be less able to manage unpredictable changes in network demand associated with their introduction, and so maintain the quality of network services for all of its users.
In other words, the next big app or service could cripple wireless networks, and under Title II, providers would be hamstrung by regulations to solve the problem in a timely manner. Want to launch an innovative new streaming video app? Good luck gaining users when your app meets a road block of network congestion.
Too often the debate surrounding net neutrality is one of extremes, and I freely admit the above scenario falls within that category. But also too often, the economic realities of building, upgrading, and maintaining networks are either ignored or downplayed. Net neutrality doesn’t have to be an emotional issue; we all benefit from the Internet continuing to be open. The question is, how best do we ensure that happens while at the same time encouraging the investment necessary to keep networks growing. As Hassett and Shapiro’s study makes clear, the numbers show Title II would do more damage than good.
Speaking of op-eds, our Co-Chairman Larry Irving — who served on the Clinton Administration’s technology teams — also had a piece published today. In it, he argues heavy-handed regulations could stifle the next big thing in broadband — gigabit networks:
This week, President Obama asked the FCC to reclassify consumer-based Internet service as a Title II service under the 1934 Communications Act, essentially equating to heavy regulation of broadband. As the Federal Communications Commission weighs options during its Open Internet proceeding, the question remains whether today’s policy makers will be successful in maintaining a regulatory and investment climate that will promote continued investment in and innovation of new broadband networks.
My hope is that the public officials in charge of this stage of Internet growth approach their roles with as much regulatory humility as we did, aiming to steer, not row, and remembering what Secretary Brown understood: Innovation is not inevitable. The regulatory choices they make will propel or forestall innovation.
Many proponents of “net neutrality” routinely declare the Internet sky is falling. That if the government — specifically, the Federal Communications Commission — doesn’t take far greater control of the Internet, then the very platform itself will all but collapse.
Such scare tactics may rile up Americans, but ironically, it’s the very solution proponents are now pushing that could deal the most devastating blow to the free and open Internet.
Title II reclassification may seem simple — just make the Internet a public utility! — but as a new paper from Anna-Maria Kovacs shows, reclassification would have far greater consequences for the Internet than its supporters let on.
Kovacs’ paper, “Regulations in Financial Translation: Investment Implications of the FCC’s Open Internet Proceeding,” is a dense 27-page read, but don’t let the length — or the dry academic title — deter you from digging in. In the paper, Kovacs takes the temperature of communication investors as the FCC continues to mull over reclassification. And while the majority of investors don’t expect the Commission to use the “nuclear option” of Title II, as it’s commonly known, that doesn’t mean they’re breathing easy. As Kovacs writes (all emphasis mine):
From the perspective of investors, Title II reclassification makes no sense. It does not solve the problem of paid prioritization that the vast majority of net neutrality advocates are demanding the FCC solve, but it carries the risk of enormous collateral damage to both infrastructure and edge providers. It would bring stultifying regulation that would choke the Internet ecosystem that has become on of the primary engines of economic growth for the U.S. and the world. It would encourage other governments to follow suit, endangering the success of American digital service — and application-providers abroad.
This stultifying regulation, Kovacs rightly argues, would be especially brutal to mobile broadband investment, where America leads the rest of the world by leaps and bounds. Kovacs again:
U.S. mobile Internet traffic is expected to grow at a compound annual rate of 50% per year between 2013 and 2018. Keeping up with that traffic will require ongoing capital investments as well as additional spectrum. During 2014-2015, mobile broadband Internet access providers (mobile BIAs) are expected to raise about $57 billion for spectrum purchases, as indicated by the FCC’s reserve price for the 2014 AWS-3 auction and the Greenhill report’s valuation of the broadcast spectrum the FCC hopes to sell in early 2016. That $57 billion is, of course, in addition to the $68 billion in capital investments that mobile BIAs will spend over those two years. Thus, for the FCC’s spectrum auctions to be successful, mobile BIAs will need to raise 84% more funding during 2014-2015 that they do in normal years. With increased price competition and a shrinking revenue base — something the wireline industry has endured for years but that is new to wireless — these companies are facing an increasingly skeptical investment community that will have little tolerance for regulatory shock, on either the fixed or mobile side.
That’s a whole lot of numbers (and acronyms) to digest, but boiled down it means a) Providers need more spectrum; b) Billions will need to be raised to purchase that spectrum; c) Investment dollars could easily dry up in the face of regulatory actions like reclassifying under Title II.
Kovacs goes on in the paper to make the case that the FCC has sufficient authority to ensure the Internet remains open under section 706, which makes it possible for the Commission to create rules specifically for this purpose. While those rules would still face judicial review, they would also keep the FCC (which, remember, is made up of appointed officials) from overreach. In contrast, Kovacs points out, Title II…
...automatically invokes price regulation, resale and interconnection obligations, customer privacy rules, and numerous other obligations, which have been implemented via many thousands of regulations at the FCC and various state commissions.
Thousands of government regulations. Does that sound like a free and open Internet?
But what about forbearance, the provision with mythical powers that Title II proponents point to as a counterpoint to the excessive regulations argument? Well, Kovacs makes plain why the idea of the FCC using forbearance powers doesn’t sit well with investors:
While the FCC is allowed to forbear from some of those obligations if it can justify the forbearance to the courts, investors who have watched the attempts of ILECs to obtain forbearance are all too aware of the difficulties of that process. For example, investors have watched ILECs lose most of their market share yet still be treated by the FCC and state commissioners as if they were dominant carriers for PSTN voice service. As a result, they have little faith that the FCC would apply Title II to BIAs but then forbear from all the regulations that come with that.
Look, when it comes down to it, we all want the Internet to remain open. It’s in the best interest of consumers and providers to keep it that way. But we also need to keep investment dollars flowing into our communications infrastructure. As Kovacs’ paper shows, Title II won’t really do either. Instead, it could have the complete opposite effect. Want the Internet sky to fall? Saddle it with regulations created when Franklin D. Roosevelt was in office.
The Progressive Policy Institute has released its annual list of “Investment Heroes,” and at the top of the list are AT&T and Verizon, with estimated capital expenditures of more than $20 billion and $15 billion, respectively. That’s a lot of investment dollars, but as Hal Singer warns in Forbes, current regulations being considered by the FCC could severely hurt that investment going forward:
This week, PPI released its third annual report on “U.S. Investment Heroes,” authored by Diana Carew and Michael Mandel, which analyzes publicly available information to rank non-financial companies by their capital spending in the United States. Once again, AT&T and Verizon ranked first and second, respectively, with $21 and $15 billion in domestic investment in 2013. Comcast, Google, and Time Warner also made PPI’s top 25 list, each investing over $3 billion. The authors credit investment in the core of the network with sparking the rise of the “data-driven economy.”
In light of the results from prior experiments in rate regulation, the FCC should eschew calls to regulate ISPs under Title II. The incremental benefits (potentially barring fast lanes) are dubious, but the incremental costs (less investment at the core of the network) would be economically significant. Given its size and contribution to the U.S. economy in terms of jobs and productivity, even a small decline in core investment in response to rate regulation would impose social costs beyond the immediate harm to broadband consumers from an atrophying network.
That’s the amount of investment broadband providers have made in networks since 1996, according to a new report from the US Telecom association. Obviously, that’s a lot of investment, and as the paper shows, all those dollars have made a huge difference when it comes broadband access and speeds. Some highlights:
• Over 95% of Americans can access fixed broadband, with 88% having at least two providers to choose from.
• 99% of Americans have broadband at speeds 10 mbps or more available to them.
• 99% also have mobile broadband available, with 97% able to choose from at least three providers.
• Broadband investment jumped to 10% — from $69 billion in 2012 to $75 billion in 2013.
While those are some impressive numbers across the board, It’s not all rosy news from US Telecom. As the association notes in its press release:
Ongoing investment in all broadband networks, wireline and wireless, will be essential to accommodate the expected data traffic growth and enable the continued adoption of more powerful information and communications technologies and applications. Economically efficient investment in U.S. broadband infrastructure will pay off in the form of consumer welfare, business productivity, and global competitiveness. As noted in USTelecom’s blog on investment, a move to stricter Title II regulation could inject unnecessary uncertainty and negative pressures into the broadband investment equation. This poses risks to broadband investment, and also to the so-called “virtuous cycle” of innovation among broadband and related information technology industries.
Investment in broadband matters, which makes any move away from the “light regulatory touch” in place since 1996 all the more problematic. Can the FCC keep the Internet open without putting all this investment at risk? The Progressive Policy Institute thinks so. According to their recent paper, “The Best Path Forward on Net Neutrality,” they’re confident the FCC can achieve its goals by leaning on its Section 706 authority.
A new paper from Progressive Policy Institute Senior Fellow Hal Singer and Brookings Non-Resident Senior Fellow Robert Litan examines the effect Title II regulations could have on investment and the Internet ecosystem as a whole. An excerpt:
Imposing public-utility style regulation on Internet access would dampen innovation and investment in more, faster broadband. We propose the FCC implement the same case-by-case process to adjudicate discrimination complaints it has established for cable companies to broadband providers.
It’s not just investment from traditional ISPs that could be negatively effected, Singer and Litan also warn. Many companies that provide services on the Internet could also find themselves among those regulated under Title II:
Reclassifying Internet access as a “telecommunications service” under Title II, as supplemented by the provisions of the Telecommunications Act of 1996, opens up the possibility that other tech services meet the same test. The clearest example would be Google’s ultra-fast broadband service, Google Fiber, which the company is gradually rolling out. But it does not stop there. There is a very slippery slope from subjecting ISPs as common carriers to including other forms of Internet transmissions, because they arguably use “telecommunications services,” the legal hook in Title II for its application.
For example, why not then include within the ambit of a telecommunications service the linkage to an advertiser’s website that Google and Microsoft provide for users of their search engines? By clicking on links, the search engine uses the Internet backbone; if Internet access is a “telecommunications service,” because it provides “transmissions,” then so, too, are the search engines. The same logic potentially applies to Amazon’s Kindle book reader device and service, because its owners are able to download books from Amazon, but only because they are connected to a wireless provider of Internet access in the process. Indeed, what would stop the FCC from classifying as Title II common carriers all device makers that have a connection to an ISP?
It’s not all concern and dire warnings in Singer and Litan’s paper, however, as the duo argue the FCC should focus its efforts on something already within its power:
[W]e think the FCC should eschew the heavy-handed approach of Title II regulation, and lean instead on its Section 706 authority to regulate potential abuses by ISPs on a case-by-case basis. Investment across both edge and content providers will be greater compared to Title II, and the FCC can avoid any unintended consequences such as creeping regulation that encompasses content providers or other ISP services.
Last week, our Co-Chairman Larry Irving appeared on Government Matters to discuss Title II and the very real risks it could have on investment, innovation, and the entire Internet ecosystem. Check it out.
This is the second installment of our “Let’s Get Nerdy!” series, where we take tech policy issues that are currently top of mind in our nation’s capital and explain how they are relevant to Americans across the map.
In this installment, our Co-Chairman Larry Irving discusses the effect reclassifying Internet service under Title II of the 1934 Communications Act will have on investment and innovation.
Ready to get nerdy? Let’s go!
How could Title II affect investment?
Could Title II regulations impact the Internet ecosystem on a large scale?
What is the best path for the Federal Communications Commission (FCC) to take in terms of net neutrality?
Our thanks to Irving for sharing his thoughts. Check out the previousepisodes of “Let’s Get Nerdy.”
In a must-read piece for GigaOm, Richard Bennett, the co-inventor of Wi-Fi, argues that Title II would do much more harm than good to the Internet. An excerpt:
Technology regulators must be humble, only intervening in commercial squabbles as a last resort. For all its warts, the permissive broadband approach to internet regulation is the better way forward. The FCC should free broadband networks from the specter of telephone-era regulations and nudge them in the direction of even higher performance, including expedited delivery services for applications that need them, such as immersive video conferencing, HD voice, and other real-time applications.
Via Mike Dano of Fierce Wireless, a new report predicts that investment in wireless networks won’t be slowing down anytime soon — assuming policymakers don’t throw a wrench in a well-oiled machine, that is. As Dano writes:
According to a new report from the Telecommunications Industry Association, U.S. wireless carriers will spend a total of $159.3 billion on wireless network equipment and infrastructure during the next four years, up fully 40 percent from the $113.9 billion in cumulative spending during the previous four years.
Wireless carriers have been some of the biggest investors in America’s economy for years now, which is one of the reasons placing heavy-handed regulations on the industry is a really bad idea.
Eighty years ago this month, the Telecommunications Act of 1934 was created to regulate America’s nascent telephone service. At the time, only about 12 percent of U.S. families had phone service and rotary phones were the norm. Touch-tone phones wouldn’t appear for another three decades. This was the era of “party lines” and operators memorialized in movies sitting in front of large switchboards connecting callers to “KLondike 5-1234.”
As we mark the law’s 80th anniversary, now is not the time to slap the modern, high-speed, innovative and entrepreneur embracing Internet with rules that Congress designed for rotary telephones.
Keeping the Internet available to everyone is the right goal. However, applying Title II of the 1934 law, which treated traditional phone service as a public utility, to broadband could bring the pace of entrepreneurism and investment on the Internet to a crawl. Since 1996, when Congress last updated telecommunications laws, ISPs have invested more than $1.2 trillion. The average Internet connection speed in the U.S. has just hit a remarkable 10 Mbps, which is more than enough to stream an HD movie.
Suddenly putting the Internet under Title II could result in too much innovation needing pre-approval by the FCC. Instead of today’s “bottom up” dynamism in which consumer demands drive change, the web could become hostage to the federal government’s timetable. The spirit and freedom to innovate could depend on Congressional and FCC action.
Today’s Internet is the most free and accessible it’s ever been. That’s getting lost in the push for Title II regulation. America’s broadband deployment continues to rise and 70% of us now have broadband connections at home, according to Pew. People are spending more time online, enjoying real-time benefits with education, healthcare and entertainment.
Yes, the DC Court of Appeals overturned parts of the 2010 Order. But crucially, major ISPs continue to abide by the openness policies, which shows that they recognize the value of providing the freedom that Net users demand.
Belligerents making hyperbolic arguments from opposing corners dominate too many debates in Washington. Ensuring an open Internet doesn’t have to be one of those fights. Nobody wants to turn what we used to call the “information superhighway” into a four-lane toll road with federal monitors stationed at every onramp. Nor should there be an HOV lane only accessible for the wealthiest that leaves the rest of us stuck in a slow moving traffic jam.
Now is the time for common sense rules that are fair to consumers and companies and ensure high speed Internet access to individuals and entrepreneurs without the unintended consequences of 1930’s rotary phone era regulation.
Any architect will tell you that it’s impossible to build a house without a blueprint. This is true even more in telecom. Fortunately, the country just celebrated the fourth birthday of the National Broadband Plan, our blueprint for the future of broadband.
Often, government reports sit on shelves gathering dust. Thankfully, this one did not. Acting on a request from Congress, the Federal Communications Commission (FCC) produced a report that was a vision for a connected future of universal broadband and a clarion call to move forward with innovation rather than letting America fall behind other countries.
The Plan started with a clear vision: every American deserves broadband. Not only that, every American needs broadband as it becomes increasingly critical for applying for jobs, learning new skills, communicating with others, and accessing our government. As the report said, “broadband can be our foundation for economic growth, job creation, global competitiveness and a better way of life.”
Over the last four years, there has been great progress. When the report was adopted, over 100 million Americans did not have broadband and 14 million Americans did not even have access to infrastructure that would enable broadband applications. Now, those numbers are significantly smaller, thanks to private sector investment and government’s continued focus. According to a White House report from last June, “about 91 percent of Americans have access to wired broadband speeds of at least 10Mbps downstream, and 81 percent of Americans have access to similarly fast mobile wireless broadband.”
In fact, that 2013 report notes that the definition of “broadband” has essentially shifted to speeds greater than 10 Mbps rather than the government’s historic definition of broadband beginning at 3 Mbps, which is good enough for one user at a time to load photos onto Facebook in a household, but not fast enough to download HD video from Netflix. Average delivered broadband speeds have doubled since 2009 to keep up with consumer needs.
This is only a beginning: President Obama’s recent State of the Union set a goal that 99% of students would have access to ultra-high speed broadband in schools and libraries over the next four years.
That kind of achievement only happens with massive levels of private sector investment, and the private sector has begun doing its part. Over the last four years, tens of billions of dollars of investment from the private sector have been directed towards expanding broadband access and increasing broadband speed. Investment in wireless broadband alone jumped over 40% between 2009 and 2012. In fact, two companies in this sector – AT&T and Verizon – were named “Investment Heroes” by the Progressive Policy Institute for their commitment to America’s telecommunications future. This is appropriate as the Plan stated that “broadband is the great infrastructure challenge of the early 21st century.”
To meet that challenge, government must encourage more private investment, while ensuring equitable access for every American to benefit from all that broadband has to offer. As the report stated, “the role of government is and should remain limited.”
As with many such efforts, this won’t happen without effort. The National Broadband Plan made clear that the nation would eventually have to make the transition from the aging telephone network to a system based on new broadband technologies. An FCC technology task force made the point even more clearly – that transition must happen over the course of this decade.
In fact, most consumers have already made this transition voluntarily. Less than one-third of residential consumers still use “plain old telephone service” at home (U-verse or Skype anyone?). The FCC has recently approved trials for these next-generation networks, which is a major step forward towards the all-broadband future foreshadowed in the Plan.
Four years after the National Broadband Plan, we have a vibrant, robust, cross-platform competitive system in which more and more Americans are gaining access to faster and faster broadband every day. There is more work to do, so let’s keep moving forward and not inhibit it through policies and regulations that would slow investment rather than increase it. If we want to be sure that every American has access to broadband, we should follow the vision set out in the National Broadband Plan for universal broadband, and move quickly toward the transition to modern high-speed broadband networks and services.
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.
The numbers are in, and when it comes to CAP EX spending, cable and wireless providers are once again stepping up this year, according to Investor’s Business Daily. The majority of that investment will be going to improving and modernizing networks, whether it’s fixed or mobile broadband. Good news for consumers, and even better news for the economy as a whole.
The Obama administration has long made connecting schools with high-speed Internet a priority. Now, following the most recent State of the Union address when President Obama announced a private-public partnership to do just that, everything is starting to come together. As Justin Sink of The Hillreports:
President Obama is set Tuesday to announce more than $750 million in charitable commitments from technology and telecom companies for a new effort to bring high-speed Internet to the classroom.
Speaking at a middle school in suburban Maryland on Tuesday, Obama will announce “major progress toward realizing the ConnectED goal to get high-speed Internet connectivity and educational technology into classrooms, and into the hands of teachers trained on its advantages,” the White House said in a statement.
Among those contributing are major providers AT&T, Verizon, and Sprint — each pledging up to $100 million — along with tech companies Apple, Microsoft, and more. From AT&T’s statement announcing their contribution:
“The most important investment we can make to drive long-term prosperity for our country is finding smart new ways to make technology work for schools, teachers and students,” said Jim Cicconi, senior executive vice president, AT&T external and legislative affairs. “Providing access to mobile broadband for educational purposes and the tools teachers need to help their students excel is a foundational building block to improving educational results.”
Given that at least 70% of American schools are unable to offer all their students access to high-speed Internet, this is a pretty big deal.
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.
Wall Street and K Street are separated by a mere 225 miles, but for many companies they are worlds apart. In particular, industry observers would do well to compare everything said to policymakers with statements by the same competitors made to Wall Street investors. Defense companies, for example, warned policymakers that sequestion would spell the death of the defense industry, yet defense stocks more than doubled since the law prescribing the spending cuts was passed and defense players figured out how to deal with the changes, as they promised Wall Street they would. Telecom companies likewise present sometimes radically-divergent world views on K Street and Wall Street.
Take Sprint. In a January 7 filing at the FCC, Sprint argued that the special access market “in almost every part of the country does not support competition for core DS-1, DS-3 and similarly sized Ethernet channel termination facilities [.]” Sounds pretty dire. Unfortunately, in its conversation with the FCC, Sprint failed to include some other important facts it shared with its understandably-bullish investors. Specifically:
• Two years ago, Sprint entered the market for competitive alternatives for their back haul services to replace incumbent telephone company special access in its network – under the project name “Network Vision.”;
• Sprint initiated a competitive bidding process for its “Network Vision” project that it expected to have 25-30 “significant backhaul providers.”
• Following the competitive bid process, Sprint awarded numerous contracts for their backhaul services to competitive backhaul providers. In fact, in a filing at the FCC, Verizon confirmed that it bid for Sprint’s backhaul business in this process, yet was awarded only 6% of Sprint’s backhaul sites in Verizon’s incumbent telephone company footprint.
• Sprint recently provided details regarding its Network Vision project to the Securities and Exchange Commission, and noted in its 2013 10-K filing that “Network Vision will encompass approximately 38,000 cell sites. We have more than 13,500 sites on-air and have launched LTE in 88 cities. Further deployments of Network Vision technology, including LTE market launches and enhancements of our 3G technology, are expected to continue through the middle of 2014. We expect Network Vision to bring financial benefit to the Company through migration to one common network, which is expected to reduce network maintenance and operating costs through capital efficiencies, reduced energy costs, lower roaming expenses, backhaul savings, and reduction in total cell sites.
• In short, Sprint told the SEC not only that Network Vision was proceeding but that it expected further deployments through 2014.
Investors will reasonably conclude that the market is competitive for what Sprint terms “core DS-1, DS-3, and similarly sized Ethernet channel termination facilities.” And Sprint seems to have a reasonable competitive position and strategy that is proceeding apace. Good news for customers and investors, but tougher news for those aiming to perpetuate the perception that our highly-competitive telecommunications network lacks competition in the special access market.
Next Tuesday, IIA is teaming up with RocketSpace for a discussion on the future of communication in America. We’re calling it “Next-Gen Networks: Impact on Innovation, Education, Regulation & Economy,” and it will feature some rather heavy hitters in the tech and policy space. How heavy? Well, FCC Commissioner Jessica Rosenworcel for one, Bill Coughran of Sequoia Capital for two, and Vivek Wadhwa, Vice President of Research and Innovation at Singularity University for three.
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…
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As a condition of your use of the Internet Innovation Alliance Web Site, you warrant to Internet Innovation Alliance that you will not use the Internet Innovation Alliance Web Site for any purpose that is unlawful or prohibited by these terms, conditions, and notices. You may not use the Internet Innovation Alliance Web Site in any manner which could damage, disable, overburden, or impair the Internet Innovation Alliance Web Site or interfere with any other party’s use and enjoyment of the Internet Innovation Alliance Web Site. You may not obtain or attempt to obtain any materials or information through any means not intentionally made available or provided for through the Internet Innovation Alliance Web Sites.
USE OF COMMUNICATION SERVICES
The Internet Innovation Alliance Web Site may contain bulletin board services, chat areas, news groups, forums, communities, personal web pages, calendars, and/or other message or communication facilities designed to enable you to communicate with the public at large or with a group (collectively, “Communication Services”), you agree to use the Communication Services only to post, send and receive messages and material that are proper and related to the particular Communication Service. By way of example, and not as a limitation, you agree that when using a Communication Service, you will not:
Defame, abuse, harass, stalk, threaten or otherwise violate the legal rights (such as rights of privacy and publicity) of others.
Publish, post, upload, distribute or disseminate any inappropriate, profane, defamatory, infringing, obscene, indecent or unlawful topic, name, material or information.
Upload files that contain software or other material protected by intellectual property laws (or by rights of privacy of publicity) unless you own or control the rights thereto or have received all necessary consents.
Upload files that contain viruses, corrupted files, or any other similar software or programs that may damage the operation of another’s computer.
Advertise or offer to sell or buy any goods or services for any business purpose, unless such Communication Service specifically allows such messages.
Conduct or forward surveys, contests, pyramid schemes or chain letters.
Download any file posted by another user of a Communication Service that you know, or reasonably should know, cannot be legally distributed in such manner.
Falsify or delete any author attributions, legal or other proper notices or proprietary designations or labels of the origin or source of software or other material contained in a file that is uploaded.
Restrict or inhibit any other user from using and enjoying the Communication Services.
Violate any code of conduct or other guidelines which may be applicable for any particular Communication Service.
Harvest or otherwise collect information about others, including e-mail addresses, without their consent.
Violate any applicable laws or regulations.
Internet Innovation Alliance has no obligation to monitor the Communication Services. However, Internet Innovation Alliance reserves the right to review materials posted to a Communication Service and to remove any materials in its sole discretion. Internet Innovation Alliance reserves the right to terminate your access to any or all of the Communication Services at any time without notice for any reason whatsoever.
Internet Innovation Alliance reserves the right at all times to disclose any information as necessary to satisfy any applicable law, regulation, legal process or governmental request, or to edit, refuse to post or to remove any information or materials, in whole or in part, in Internet Innovation Alliance’s sole discretion.
Always use caution when giving out any personally identifying information about yourself or your children in any Communication Service. Internet Innovation Alliance does not control or endorse the content, messages or information found in any Communication Service and, therefore, Internet Innovation Alliance specifically disclaims any liability with regard to the Communication Services and any actions resulting from your participation in any Communication Service. Managers and hosts are not authorized Internet Innovation Alliance spokespersons, and their views do not necessarily reflect those of Internet Innovation Alliance.
Materials uploaded to a Communication Service may be subject to posted limitations on usage, reproduction and/or dissemination. You are responsible for adhering to such limitations if you download the materials.
MATERIALS PROVIDED TO Internet Innovation Alliance OR POSTED AT ANY Internet Innovation Alliance WEB SITE
Internet Innovation Alliance does not claim ownership of the materials you provide to Internet Innovation Alliance (including feedback and suggestions) or post, upload, input or submit to any Internet Innovation Alliance Web Site or its associated services (collectively “Submissions”). However, by posting, uploading, inputting, providing or submitting your Submission you are granting Internet Innovation Alliance, its affiliated companies and necessary sublicensees permission to use your Submission in connection with the operation of their Internet businesses including, without limitation, the rights to: copy, distribute, transmit, publicly display, publicly perform, reproduce, edit, translate and reformat your Submission; and to publish your name in connection with your Submission.
No compensation will be paid with respect to the use of your Submission, as provided herein. Internet Innovation Alliance is under no obligation to post or use any Submission you may provide and may remove any Submission at any time in Internet Innovation Alliance’s sole discretion.
By posting, uploading, inputting, providing or submitting your Submission you warrant and represent that you own or otherwise control all of the rights to your Submission as described in this section including, without limitation, all the rights necessary for you to provide, post, upload, input or submit the Submissions.
THE INFORMATION, SOFTWARE, PRODUCTS, AND SERVICES INCLUDED IN OR AVAILABLE THROUGH THE Internet Innovation Alliance WEB SITE MAY INCLUDE INACCURACIES OR TYPOGRAPHICAL ERRORS. CHANGES ARE PERIODICALLY ADDED TO THE INFORMATION HEREIN. Internet Innovation Alliance AND/OR ITS SUPPLIERS MAY MAKE IMPROVEMENTS AND/OR CHANGES IN THE Internet Innovation Alliance WEB SITE AT ANY TIME. ADVICE RECEIVED VIA THE Internet Innovation Alliance WEB SITE SHOULD NOT BE RELIED UPON FOR PERSONAL, MEDICAL, LEGAL OR FINANCIAL DECISIONS AND YOU SHOULD CONSULT AN APPROPRIATE PROFESSIONAL FOR SPECIFIC ADVICE TAILORED TO YOUR SITUATION.
Internet Innovation Alliance AND/OR ITS SUPPLIERS MAKE NO REPRESENTATIONS ABOUT THE SUITABILITY, RELIABILITY, AVAILABILITY, TIMELINESS, AND ACCURACY OF THE INFORMATION, SOFTWARE, PRODUCTS, SERVICES AND RELATED GRAPHICS CONTAINED ON THE Internet Innovation Alliance WEB SITE FOR ANY PURPOSE. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, ALL SUCH INFORMATION, SOFTWARE, PRODUCTS, SERVICES AND RELATED GRAPHICS ARE PROVIDED “AS IS” WITHOUT WARRANTY OR CONDITION OF ANY KIND. Internet Innovation Alliance AND/OR ITS SUPPLIERS HEREBY DISCLAIM ALL WARRANTIES AND CONDITIONS WITH REGARD TO THIS INFORMATION, SOFTWARE, PRODUCTS, SERVICES AND RELATED GRAPHICS, INCLUDING ALL IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, TITLE AND NON-INFRINGEMENT.
Internet Innovation Alliance reserves the right, in its sole discretion, to terminate your access to the Internet Innovation Alliance Web Site and the related services or any portion thereof at any time, without notice. GENERAL To the maximum extent permitted by law, this agreement is governed by the laws of the State of Washington, U.S.A. and you hereby consent to the exclusive jurisdiction and venue of courts in King County, Washington, U.S.A. in all disputes arising out of or relating to the use of the Internet Innovation Alliance Web Site. Use of the Internet Innovation Alliance Web Site is unauthorized in any jurisdiction that does not give effect to all provisions of these terms and conditions, including without limitation this paragraph. You agree that no joint venture, partnership, employment, or agency relationship exists between you and Internet Innovation Alliance as a result of this agreement or use of the Internet Innovation Alliance Web Site. Internet Innovation Alliance’s performance of this agreement is subject to existing laws and legal process, and nothing contained in this agreement is in derogation of Internet Innovation Alliance’s right to comply with governmental, court and law enforcement requests or requirements relating to your use of the Internet Innovation Alliance Web Site or information provided to or gathered by Internet Innovation Alliance with respect to such use. If any part of this agreement is determined to be invalid or unenforceable pursuant to applicable law including, but not limited to, the warranty disclaimers and liability limitations set forth above, then the invalid or unenforceable provision will be deemed superseded by a valid, enforceable provision that most closely matches the intent of the original provision and the remainder of the agreement shall continue in effect. Unless otherwise specified herein, this agreement constitutes the entire agreement between the user and Internet Innovation Alliance with respect to the Internet Innovation Alliance Web Site and it supersedes all prior or contemporaneous communications and proposals, whether electronic, oral or written, between the user and Internet Innovation Alliance with respect to the Internet Innovation Alliance Web Site. A printed version of this agreement and of any notice given in electronic form shall be admissible in judicial or administrative proceedings based upon or relating to this agreement to the same extent an d subject to the same conditions as other business documents and records originally generated and maintained in printed form. It is the express wish to the parties that this agreement and all related documents be drawn up in English.
COPYRIGHT AND TRADEMARK NOTICES:
All contents of the Internet Innovation Alliance Web Site are: and/or its suppliers. All rights reserved.
The names of actual companies and products mentioned herein may be the trademarks of their respective owners.
The example companies, organizations, products, people and events depicted herein are fictitious. No association with any real company, organization, product, person, or event is intended or should be inferred.
Any rights not expressly granted herein are reserved.
NOTICES AND PROCEDURE FOR MAKING CLAIMS OF COPYRIGHT INFRINGEMENT
Pursuant to Title 17, United States Code, Section 512(c)(2), notifications of claimed copyright infringement under United States copyright law should be sent to Service Provider’s Designated Agent. ALL INQUIRIES NOT RELEVANT TO THE FOLLOWING PROCEDURE WILL RECEIVE NO RESPONSE. See Notice and Procedure for Making Claims of Copyright Infringement.