8 Comments

Summary:

This is the third in a debate between Craig Settles, a broadband industry consultant and Blair Levin, the writer of the National Broadband Plan. Settles believes he and Levin agree on more than they disagree, and clarifies points made in his first post.

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Edit Note: This is the third in a debate between Craig Settles, a broadband industry consultant and Blair Levin, the writer of the National Broadband Plan. The original story can be found here, and Levin’s response can be found here.

Mr. Levin, it’s good to see your response to my column. You’re right that some clarifications are needed, starting with how each of us views the broadband world. I respond to many broadband policy statements from the perspective of how they impact local businesses and institutions. One reason is because when official Washington talks about the primary benefits of broadband, it’s often in terms of improving economic development and achieving other significant outcomes that these constituents must drive, and for which more bandwidth is needed than 4 Mbps.

Realistically, who’s going to build one network in a community at 4 Mbps for consumers, and a second one for businesses and institutions? Whatever network you advocate and subsidize has to, I would think, address both groups. This is why in my column I acknowledged and agreed with you and the plan for saying we need 1 gigabit everywhere. At best, I’d see the 4 Mbps as a two- or three-year short-term, “stepping stone” goal, but not a 10-year goal.

Another reason I view broadband policy through the lens of business and institutional subscribers is financial sustainability. If you build a network in small and rural communities, it’s going to be the businesses, home-based entrepreneurs, local governments and institutions that will generate the lion’s share of the revenue. Consumers playing games and watching TV are the gravy, but not the financial foundation of networks.

As I read your responses to much of my critique, I see that your perspective is weighted toward 1) consumers and 2) subsidy issues. Subsequently, our respective comments need to be viewed and responded to with that in mind. I worry less about whether communities have enough capacity for entertainment and general access (4 or 5 Mbps), and more about will the network transform communities (hundreds of Mbps and gigabits per second). A network that transforms a community will take care of individuals’ less serious needs. The reverse probably isn’t going to happen.

I have to push back on your assertion that businesses have the bandwidth they need, particularly when we talk about their needs in the next 3 to 5 years. I’ve talked to too many communities, particularly in small towns and rural counties, where this is not the case. We can lob quantitative stats and qualitative assessments back and forth since we’ve both obviously gathered a lot of data and feedback, but I stand by my position on this.

I don’t look at a community with multiple providers and automatically assume their needs are being met, particularly those constituent groups I listed above. Yes, they are better off than communities with nothing, and if all I had was $5, I’d give it to the town without first. But you have to examine just how much better off is the town with several providers? Five companies vying to sell bicycles and none selling cars in a Minnesota town technically is competition in transportation. While better than having no transportation, bikes offer little value if what I need in the winter is to go 50 miles both ways to work, run a delivery business on the side and get my toddlers to daycare.

Broadband is similar to my bicycle example. Plenty of communities have multiple providers selling the equivalent of bicycles and overpriced and often undependable motor scooters. But they don’t have enough options for the higher level of broadband needed to address the many goals we say we want broadband to deliver. I agree this is a very complex, challenging issue to resolve. However, I definitely do not feel the issue is addressed sufficiently in the plan, and this will continue to be one of its bigger flaws. IMHO.

I likewise don’t look at the process of government regulation and automatically say it’s good or it’s bad. But I do get leery when I hear words such as “monstrous,” “job-killing”  or “oppressive” used by various parties to describe regulations, since I feel these terms are often overblown rhetoric. I have enough business sense and experience to accept that certain regulations can suck the life out of an entity, and common sense should come into play. But I’m an average citizen first, and lean heavily toward being protected as such.

The future role of wireless vs. wireline is another area where we’ll probably continue to disagree. Mobile broadband is, to me, the weak link in the wireless chain, as opposed to fixed wireless, when you consider what fixed can deliver now versus the brightest projections for LTE. On top of that, based on telecom’s history, I don’t foresee LTE making its way out beyond suburbia anytime soon.

As for the issue of subsidies, I should have been clearer that it’s the process by which these decisions are made that I have problems with, much more than what gets subsidized. For example, my knowledge of Universal Service Fund mechanics continues to increase, but my primary observation is that communities should be an integral part in submitting and/or approving projects that USF supports.

I’ve read proposed USF reform details, and I spoke with several people at the FCC about this. Yes, the Broadband Plan encourages restrictions be removed from communities’ ability to build and own broadband infrastructure. I’m ECSTATIC about that. However, what I advocate is that communities have an active role in where those USF dollars go and for what technology and purpose.

National incumbents and D.C. administrators don’t know best what technology, what level of investment, Monticello, Minn. needs; Monticello stakeholders do. The best thing USF reformers can do is establish benchmarks by which communities have to demonstrate need and the validity of the proposed project to succeed, hire people who can credibly evaluate compliance with those benchmarks, then provide oversight as communities and private sector partners of communities’ choosing get the job done.

One of my big criticisms of the broadband stimulus was that communities’ input (not to be confused with governors’ recommendations) seemed to have less sway than incumbents in final decisions regarding the merits of proposals submitted or ability of the entities submitting them to meet communities’ needs. If billions in USF money flies out the door to programs and entities in similar fashion, I feel many communities’ needs will not be met.

By the way, when I answered your question about how much broadband deployment will cost, I was flippant. In reality, I think when people put a national price tag on the total cost of broadband, it’s an estimate based heavily on private sector business practices and conditions. Furthermore, I feel the cost modeling comes from the mindset that they’re building one monolithic infrastructure. Every community (city, county, whatever) that develops a broadband solution for their respective areas will come up with different tech requirements, financing models, funding sources, vendors options, etc. and some of their price tags may be lower than the private sector’s. I know Congress loves to have cost projections and standards, but when it comes to broadband, it’s hard to dictate this entirely from D.C.

I’m more than happy to continue this discussion and expand participants, because there are always questions, clarifications and other options that continually come up. I believe we have more points of agreement than conflict. But of course ,the devil, as they say, is in the details.

Craig Settles is an industry analyst, co-founder of Communities United for Broadband and broadband business strategist who delivers on-site training to private and public sector organizations. Follow him on Twitter (@cjsettles) and his blog, “Fighting the Next Good Fight.”

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  1. Richard Bennett Friday, December 17, 2010

    Craig, you’ve failed once again to offer any empirical support for any of your positions. It’s all well and good to say “We can lob quantitative stats and qualitative assessments back and forth since we’ve both obviously gathered a lot of data and feedback, but I stand by my position on this,” but you’ve failed to offer any data at all to support your position. Sure, you tried to pass of the FCC’s adoption study as a deployment study, but when I busted you on that you fell back on anecdotes about what unidentified people have allegedly told you. Let’s get specific.

    What’s the problem you want to solve, and how does the NBP fail to address that problem? Provide evidence.

    What sort of “transformation” does broadband greater than 4 Mbps bring to rural communities? Provide evidence.

    Why do you want to use taxpayer money to create unsustainable rural networks? Provide evidence that this has ever worked.

    It’s all well and good to wave your hands and demand subsidies, and there certainly are cases in which they can help; but it’s another to demand other people’s money for projects with no hope of improving anyone’s quality of life. We tell the difference by carefully analyzing data and making responsible predictions.

  2. Competition works but I think it is overlooked. Consider Wilson North Carolina. They built a municipal system, it has some gestation problems they are working on but the competition lowered Time Warner’s rates and increased their speed. Here in the southeast there is digital fortress in that Time Warner (TWC) has dominated the market with AT&T running a far distant second. If TWC is allowed to continue the present state then residents will have to be higher rates. In addition, streaming video will continue to be suppressed and residents will continue to pay on average $74 pre month. That is a hidden cost that residents should not be forced to endure in this economy. I dont think the FCC is paying close enough attention to this.

  3. Om Malik should kill this debate. It is silly. Let me offer a couple of paragraphs on why.

    First and foremost there is no, absolutely zero empirical evidence shpwong that increased or better broadband leads to more economic development. In fact, it is nearly certain that increased penetration and/or speeds will have little or no effect on the economy, jobs, etc, as most of the benefits have already been captured. Scott Wallsten, the Chief Economist of the National Broadband Plan will support this view. Jon Baker, OSP’s chief economist will also support it. And if you doubt them, you can ask Greg Rosston at Stanford, or Shane Greenstein at Kellog, or any other serious, respected, accomplished economist who has done work in communications and is not obviously conflicted: they will all tell you there is no empirical evidence showing the connection.

    Yes, there are “studies” showing correlation between economic growth and broadband (as an often cited tudy by the World Bank, and Bill Lehr’s), but these do not have any meaningful data or evidence showing that increased deployment of broadband drives economic growth.

    So, what is going on here? Both Mr. Levon and Mr. Settles are writing absurd articles driven by a mix of self-interest and/or clear ignorance. In the same way that all the debate about broadband in rural areas has nothing to do with the long term competitive advantage of the US or its economic growth.

    In fact, the whole broadband USF debate is driven by 4 constituencies

    1. The rural lobby, which includes the RLECs and the senators and representatives of rural states. They want to maintain and increse the subsidy they get from all Americans. An inefficient and unfair tax which basically sustains highly inefficient local monopolies that are not appropriately regulated (a disaster for taxpayers, and a bonanza for the recipients).

    2. The large service providers whose customers shoulder the burden created by this bonanza

    3. The FCC because if USF is not important, then the FCC is less important. Mr. Levin falls in this category (one can say that he never really left the FCC since he joined to execute Reed Hundt’s vision as everyhting he has done since then has actually been about the FCC and the politics around it).

    4. other people who want to benefit from this immense subsidy flow (4.5Bn A YEAR!!), like Mr. Settles who wants more autnonomy and moneys to be directed to his consulting clients, the rural municipalities and other communities.

    There are myriad issues with what they wrote. E.g., the absurd discussion about the right speeds when a) there is no evidence that broadband matters for economic growth; b) work commissioned by the FCC National Broadband Plan (executed by Rosston et al) shows that consumers do not have any willingness to pay for higher speeds; and c) over 95% of businesses have access to adequate broadband service. And although this service may be more expensive due to limited competition (and nobody has offered anything but anecdotal information), it is absurd to say that this increased cost has any material negative effect in the US economy (or if you prefer the political tag line of the day, job creation)

    So, here you have DC insider who wanted to be chairman but couldn’t, defending the work he led (the National Broadand Plan) despite its obvious flaws and limited importance and relevance (who cares about the Plan, it is a piece of paper with no real impact and it is dead now that Genachowski faces a Republican house), and a self interested consultant who has no fact base and misses the big picture points.

    Great!

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