Broadband Bullies Shouldn't Benefit From Stimulus

It's all well and good that President-Elect Obama wants high-speed Internet connectivity to be part of the economic stimulus package. The goal, he said in a speech today (Jan. 8), is, "expanding broadband lines across America, so that a small business in a rural town can connect and compete with their counterparts anywhere in the world."

This isn't an abstract notion, or one to be simply glossed over by numbers. Here's Will Gilmer, a farmer in Lamar County, Alabama, speaking at a news conference with Gov. Bob Riley: "When farmers need up-to-the-minute weather and commodity information, that usually involves going to a Web site, going to make a cup of coffee, drinking the coffee and then coming back to see the page only half loaded."

Noting that DSL lines end less than a mile from his house, Gilmer said broadband can also help farmers tell their story: "Many people these days simply don't understand where their food comes from. As farmers, many of us want to educate the public about how production and environmental stewardship go hand in hand and how we care for our animals." Gilmer said, adding he his Internet connection is too slow to post the videos he would like to post.

In Bar Harbor, Maine, residents said they need higher speed access, either because they have home-based businesses or, as in the case of some city department heads, work from home. Dana Reed, the Bar Harbor town manager, said Time Warner wouldn't extend its broadband service more than 293 feet from its existing cable line.

What's to be done with these telephone and cable companies who refuse to bring their customers into the digital age and contribute to the local economies? Why, what else? Shower them with millions of tax dollars in grants, or tax credits, government bond-funded support or even loan guarantees so that they extend higher speed services to areas in which they haven't seen fit to expand it before, despite the demand. Those are the kinds of suggestions on the table for a stimulus package.

What else have they done to justify such public largesse? In Bar Harbor, Time Warner is protesting state grants to companies that want to fill in service areas where the cable giant has declined to go. In North Carolina, AT&T is leading the state carriers in a bid to undermine E-NC, the fine, homegrown agency that supports broadband expansion and mapping. Their tool of choice, of course, is the "Connected" franchise, which telephone companies control, and which reports only the deployment data the carriers want reported and under what conditions. (And shame on the Gates Foundation for further legitimizing these guys by including them in a plan to bring service to libraries.)

It's pretty clear that if new areas are to be served, and if underserved areas are to be upgraded, then either the incumbent telecom companies have to clean up their acts, or they have to make way for others. It's also clear that consumers should get some benefits out of the deal. As of now, consumers could be stuck on one hand with paying the telecom provider high monthly fees for the new service while at the same time having their tax dollars go to pay these big companies that won't upgrade their service (but have sufficient coin to spend millions of dollars to buy back their stock).

The good news is that there is a relatively cheap way to stimulate the telecommunications sector. The bad news is that the Federal Communications Commission or Congress have to do it. One or the other have to create new competition by allowing for other companies to have access to the lines of telecom and cable companies through wholesale or line sharing. This policy worked wonders back when there was simple old copper in the ground with much less capacity than today's advanced networks, and works wonders in other parts of the world. We should bring it back here. Second, support for consumers and companies should be reconfigured to encourage broadband. Low-income consumers benefit from programs to help them get regular telephone service; high-speed Internet (but not TV service) should also be included. Telephone companies get support for serving rural areas with regular telephone service. That money could be redirected to providing advanced Internet services as well.

If Congress and the new Administration are looking for more traditional stimuli, by all means bring on the grants and tax credits - with a twist. First, allow any company to apply for a grant to provide broadband service in an unserved or underserved area - regardless whether it's the local telephone company or local cable company. Service territories and franchise areas shouldn't count for much here. If a small, entrepreneurial company, or consortium of companies, or even another telephone company, wants to try it out, by all means let them try to build a small network that will connect to the phone or cable network. The whole network doesn't have to be duplicated.

Cities and towns should also be encouraged through grants and subsidies to remedy market failures through construction of their own networks, or partial networks to make up for the lack of services their residents are getting from the existing companies. Even though the telecom companies have fought around the country to prohibit "competition" from municipal governments, they had better not take on that fight here.

If there are no other takers, than let the (generally anti-government) phone and cable companies step up to the trough for the money, albeit with conditions that could range from line sharing and wholesaling to build-out and data speed requirements with obligations to report publicly on deployment progress and location. The companies might complain but, heck, it's free money to pay for the network while they still buy back their stock.

Finally, let consumers - individuals, businesses and government - get some of the tax credits for upgrading to faster service or starting to take a broadband service. Maybe the vision of that much increased demand, even if fueled by a subsidy, might be enough to make the companies get going. Will all that cost money?

The goal of the stimulus package is to have not only an immediate effect on the economy, but also to provide a platform for long-term growth. Perhaps these are some elements that could do that.

Comments

[lpress]

I agree with Mr. Brodsky -- we should slow down on broadband stimulus in order to consider ownership alternatives. I've written a paper that goes into some detail (http://bpastudio.csudh.edu/fac/lpress/draft/policygeneral.doc), but here is the "elevator pitch:"

The current strategy of privatization with hope for competition under independent regulation has failed in many developed and developing nations. In the US, regulators have been unable to create competition and our infrastructure has suffered.

The large broadband incumbents have benefited from public subsidy, have failed to live up to commitments, and have used their power to defeat attempts to create competition

The US has little fiber in the access network today, but will have fiber to all urban and many rural homes and buildings in the long run. The question is not whether we are going to deploy new infrastructure; the question is “who will own it?”

We should evaluate decentralized alternatives to near-total ownership by the incumbents. Local governments, cooperatives, small ISPs, and home and building owners might own parts of our next generation infrastructure.

This evaluation can be fast and cheap -- NSF proved that when they bootstrapped the Internet.

We need immediate economic stimulus, but that can come from tax cuts and investment in many sectors as well as broadband.

We will be living with the fiber and high-speed wireless infrastructure we build today for many decades. We will also be living with its owners.

[Henryk A. Kowalczyk - Huffpost Blogger]

If high-speed internet service is essential for Mr. Gilmer in Lamar County, AL, he could sign for the internet via satellite from WildBlue, http://www.wildblue.com or HughesNet,
http://go.gethughesnet.com/plans.cfm . Obviously, he would be paying about $80 per month for a basic service.

If he does not like the price, he can do what some entrepreneurs did in Kokomo, IN, http://www.hoosierbroadband.com/flash/index.html, and launch an internet service providing company, using wireless technology, widely available, and affordable. Farmers in Kokomo can get broadband internet service for $25 per month.

In the Westby, WI, for the last fifteen years, the Vernon Telephone Cooperative, http://www.vernontel.com has been replacing copper with fiber lines. Now 90% of their subscribers can get high-speed internet, and most of them can get TV over the internet. They built one of the first IPTV systems in the country.

As a Director of the Public Knowledge, Art Brodsky, knows that it is public knowledge that it is better to get something for free just by high pitch talking in Washington than by old style hard work, entrepreneurship, and taking a business risk.

If people in Lamar County, AL, or in Bar Harbor, ME, will get government giveaways, then people in Kokomo, IN, and Westby, WI, will look like fools, who worked their butts off instead of doing nothing, but asking Mr. Brodsky to mouth for them in Washington.

[StevenKeirstead]

It does seem like long range wireless broadband networks would be cheaper to set up and easier to maintain and upgrade than wired networks. I think this is the way to go for many rural areas, whether sponsored by the government or privately owned.

[UKOH]

Two issues:

(1) Wild Blue is not universally available. It was not available in my area when I needed broadband for work.

(2) Hughsnet is the biggest scam on the planet.

Here is my justification for the above statement:

Before DSL was available in my area I had DirecWay - the forrunner for Hughsnet. Here were my experiences:
- The service was outrageously expensive. The installation charges were over $1,000 and the monthly fee was in excess of $60.
- For long periods of time daily (even when the weather was perfect) the service was even slower than dial-up for simple web browsing.
- The system was far more sensitive to disruption by bad weather than my satellite TV service
- On the few occasions when I DID get true broadband service I attempted to watch live sports on a subscription web site. After a period of watching I was locked out by the "fair usage policy" that Hughs places on consumers "using more than their fair share of bandwidth". In other words, when I wanted to actually USE the service I was paying so much for I was told I was consuming too many resources!
- The equipment suffered faults frequently requiring technician on-site visits. It took 2 weeks on average before an appointment was available leaving me with no internet connection in the meantime.

Maybe Hughesnet has improved recently but based on my experiences I would recommend sticking with dial-up. At least you KNOW it is slow and

[willgilmer]

Most people I know with WB and HN satellite service in my area have regretted it, saying that the inconstant service and FAP combined with the high monthly charge, equipment purchase, and 2 year commitment is simply not worth it.

Several local wireless subscribers have also mentioned that the performance doesn't justify the cost, as it starts at $50 for 128k.
And I don't know if subscription rates are lowered by a having lots of subscribers, but if so Kokomo, IN, has several thousand more people to draw from than does my whole county.

I don't have any idea what the best answer is, but I do know that affordable, reliable broadband access is desperately needed across rural Alabama for all the reasons mentioned in Gov. Riley's press conference last week. I applaud my state government for making an investment that will hopefully lead to better opportunities for those of us who live and work more than 5 miles from the city limits sign.
http://www.gilmerdairyfarm.com

[Henryk A. Kowalczyk - Huffpost Blogger]

An unspoken assumption in this debate is that Mr. Gilmer should get the same service that we enjoy in Chicago; at the same price. Years ago, my first broadband service was double the price and half the speed of my current basic DSL line. We paid dearly for what we have.

Mr. Gilmer does not pay $30 every time when parking Downtown, and he does not spend several hours in traffic every week. His freedom from our headaches is traded for higher costs of getting high-speed internet. If his testimony is accurate, the market price for a decent service is about $80 per month.

Mr. Gilmer’s problem is a business opportunity for someone else. It worked fine in Westby, WI and Kokomo, IN. And, this is the way it should work in Lamar County, AL. Looking for the government giveaways, as Mr. Brodsky advocates, discourages entrepreneurs from investing in infrastructure as it would be impossible to stay in business, if a competitor gets government money.

Some people, including me, say that free market is best. Others say that it is socialism. Mixing the two is the worst.

If Mr. Gilmer wants the government to give him affordable broadband service, others may ask Mr. Brodsky to advocate the government for affordable milk and beef.

[tom12010]

I totally agree. I work in IT in a VERY rural area. Offsite disaster recovery is almost not possible because of the crappy Internet coverage where we are. Rural Internet FIRST, please!!

[shorewood]

While a few posts alluded to the New Deal and ancillary programs, the program I would like to see modelled is the REA. Rural Electrification is the unsung hero of the New Deal. A national program with a mandate to wire/satellite all parts of the United States is, in my opinion, the only reasonable solution. By the way, are others getting just a bit tired of those from the right who bemoan the intervention of government? These folks have moved from strident to obnoxious to now just pathetic.

[EngineerBill]

Part of Obama's infrastructure improvement program is to create a highly efficient power grid system. I think it would be dirt cheap to piggy -back a fiber optic system to reach everybody with a plug inside their home. Basically we need to say to the Telecoms provide broadband every where you can and the rest we'll install ourselves through the power grid.

[ObjectiveRealist]

Nationalize the fiber and wires. The same "eminent domain" rationale for the nationalization of private individual property, for transcontinental railroads and interstate highways, is as applicable to corporate property. Or else, corporate wealth can purchase privilege that exceeds the rights of man and this country is by definition now fascist.

[BarryS]

let the internet suppliers tell us when they will finally hook us up. years ago, it took Time Warner and their predecessor Manhattan Cable 14 years [after] a contract was signed to wire the building I used to live in. It was only after I was place on the list to testify at the franchise renewal hearing that there was any action: they wired the building [despite the 14 years!!!! of supposed problems] by the next morning, finishing minutes before my testimony. This was years ago.

How about a one-year period after which they lose their franchises or pay a fine one million dollars a day per ignored customer until they do. I bet they will figure out how to wire everyone real fast. It's a no-brainer. Ok so it costs a few billion. at least just admit it and spend the money.they already getplenty of bailouts and tax-benefits already.

[Carrie-On]

The private sector is the problem in this lack of Internet for all of America! They started up companies to "hook-up" all the communities in a region, went public, and faded into oblivion taking their investors funds with them (putting them into personal trusts), on the way to bankruptcy court. This was not accidental - it was deliberate. Worse, the major suppliers CEOs sat on the boards of these companies and helped the chairman and board members "arrange" their bankruptcies.

The federal bankruptcy courts failed in examining the activities of those boards; those funds are still in the private "family" trusts of those "high-tech" companies founders.

[Carrie-On]

Part II - such kept the high-tech industry from totally tanking! Again, it wasn't coincidental. But the feds turned their backs, because many of them, re-cycled themselves into starting up these companies.

[Wake-up]

More looney stuff... The Gov. in the Broadband business? No thanks! Let's see... the Gov. fails at virtually everything it does and you are in favor of this pork? Please, Broadband is being rolled out as the market for it emerges... why would anyone want to subsidies farmers getting broadband? What makes you think that the Gov. should be responsible for something like this... looney!

[littlepitcher]

Anyone following the Connell plane crash and election-corruption investigation will understand one small talking point: the computer scamming was run from a filthy little burg called Chattanooga, TN where the government now runs Internet services via the electric company, who purchases from TVA, who finally has a problem they can't cover up.

The Sarah Palin e-mail hack was run from the same city.

Any questions about government control of Internet service?

Not that private enterprise is always trustworthy...The predecessor Internet service in that city allowed a NY Times subsidiary reporter to hack my office e-mail in 1996 and threatened to sue me if I gossiped about it. I responded that they allowed kid porn to be run on their service, a claim which was borne out when a NPR DJ was busted with several thousand images on his computer.( We suspect that his original reference may have come from the head of Georgia NPR.) These folks, of course, have employment experience and the HR guys always hire it, government or otherwise

[EngineerBill]

Are you saying that because the electric company set up the internet broadband it led to hackers and kiddie porn? How does letting the elecric company create a broadband network cause that to happen?

[ObjectiveRealist]

quote:
the Gov. fails at virtually everything it does
/quote

False. The truth is that small-government ideologues fail at everything you do. Only government has the ability to regulate such businesses as energy (Enron loophole) and mortgage-backed securities fraud (Commodity Futures Modernization Act, Gramm-Leac­h-Bliley). When government fails to apply the rule of law under the GOP euphemism 'deregulation', government thereby abdicates its obligation to "establish justice ... promote the *general* welfare, and secure the blessing of liberty" and the resulting anarchy quickly leads to criminal violations of citizens' rights. Overdue regulation resulted in felony convictions in the Enron fraud, and the mortgage-backed securities scandal should result in many more.

The government, specifically the Defense Department, developed DARPANET and deployed the Internet in the first place. The commercialization of the Internet has been lucrative for a few businesses, but hazardous and a mixed blessing to customers; it makes information about our government more available to us, but it also makes our client machines more vulnerable to attack, due to the profit-lust that put availability before security. Proper threat assessment by the eminent experts in the field, such as Bruce Schneier, would have led to more deliberate, cautious deployment of a more secure infrastructure. Instead, it was driven by corporate lobbying.

[matt819]

Let me add my voice to the cry for expansion of broadband services and utter contempt for phone companies and cable companies that thumb their noses at those of us in rurual communities.

Our small New England town has a contract with Time Warner to supply cable services. Only problem is that the town doesn't require TW to provide ubiquitous service. The cable line ends less than a mile from my house, though TW was kind enough to offer to extend it to me for $18,000. And I'm just beyond the 18,000 foot limit for distance from the central office for DSL. The phone company that just bought Verizon's local services in New England has committed to expanding DSL to 85% of the region by something like next year, maybe a bit later. What a joke . . . committing to extend an already antiquated service, but not everywhere, and not terribly soon. This is laughable.

Wireless ISPs are popping up throughout New England, but they have line of sight issues. I'm fortunate in that respect, though speeds are still not terribly impressive, especially compared to other ISPs throughout the country that offer 3-10 Mbps. These small companies are the ones that should get grants to expand both wireless and FIOS services throughout rural communities.

[lcarliner]

What is even worse is that in the state of Florida and probably others, in areas where viable land-based broadband is not available, the public service commission allows the monopoly phone company to get away with providing crippled forms of dial-up service in which maximum modem speed can be as low as 19.6 KB (with 28.8 or 26.4 KB being typical). At these crippled speed, many of the necessary websites simply do not work reliably at all, and forget about downloading from Microsoft needed but bloated security related software updates in a timely manner! At the very least, performance standards need to be updated to REQUIRE the monopoly phone company to update their multiplexers to provide the maximum (allowable) supported dial-up modem speed in these outlying areas. In areas where broadband service is available, there is less need for this requirement, though support for maximum allowable dial-up modem speed could provide a small amount of competitive pressure for the cable companies and phone companies to provide more reasonable monthly tariffs.

Louis A. Carliner
Masaryktown, FL

[OswegoDemocrat]

This is definitely an issue that needs to be discussed in depth. Whatever it's current limitations, reliable and affordable broadband internet access will be absolutely necessary to tomorrows economy.

Economic stimulus is, by definition, an attempt to enhance commerce. What better way to enhance commerce than giving consumers reliable access to the internet?

I tend to believe that municipal services would be best, but I'm certainly willing to change my mind if someone makes a good argument for some other way.

Thankfully, the incoming administration has shown itself to be extremely adept at using technology. Let's hope they prove to be just as adept at growing it.

[JNagarya]

Let's get to the crux of the issue:

The Interent is the direct result of taxpayer-funded research. That which the taxpayer pays for the taxpayer owns.

Why is the taxpayer required to pay private mega-corporations to get access to taxpayer-owned public property?

What do negative-taxed medical and university industry give back to the community that they don't pay in taxes, and receive from the taxpayers?

Every public building, every industry which receivees taxpayer funds should provide Internet access for free to everyone. If one wants, instead, to pay a second time -- on top of those taxes -- for access, then one can give one's money to one of those private mega-corporations. But that private monopoly should not be the only choice.

Free the Interent!

[joeyfoto]

The broadband buildout will be one of the first major tests of the Obama administration. Universal very-high-speed broadband is as significant a national priority for future competitiveness, as electrification was for the TVA in the New Deal. As Milton Friedman taught us all, it is the primary mission of any CEO to put money in the pockets of his or her investors. Since this represents a major public investment in America's future, in which we, the people, are the investors, that benefit must return to us, in the form of near-universal access and stable, low rates for first-rate service. Anything less is fraud.

This is an opportunity for all the world to see, with the unmistakable clarity of action, who the administration of President Barach Obama intends to serve. I'd like to see this as an opportunity for President Obama to showcase his good intentions. We'll see...

[JNagarya]

Anything less is THEFT.

And anything less than FREE access to that which is owned BY THE TAXPAYER is UNACCEPTABLE!

Free the Internet!

[staticnoise]

I'm fairly certain the taxpayer doesn't own the servers that route internet traffic of the cables that transport it. Not that I'm a fan of the big telecom companies, but reasonable arguments have to be made if progress is to be seen in this matter.

[websmith]

There is so much bad information in this article that it's dangerous.

The majority of rural areas are served by over 1,000 small independent TelCos who are not public. Since WWII, they have bought and installed trillions of dollars worth of copper cable and telephone equipment while remaining solvent with revenue streams that are only a fraction of what the RBOCs have to work with. If it were not for these brilliant business people who are often also farmers, there would be no telephone service in rural areas today. While these IOCs have been busy for the past 10 years installing fiber and broadband for their subscribers, over 80% of the cable being used still is copper.

There are technical limitations on how far broadband will travel over coax, copper, and fiber. This has to do with the composition of the atom, not a lack of willingness to provided it.

This rural telecom industry is not yet fully recovered from the Telecom Deregulation Act of 1996 when the government took their property and forced them to sell it below value to any idiot who wanted to be a telephone company. Most of these new CLECs promptly went out of business resulting in the .com crash and leaving the independents with a mess to clean up. If you monkey with this industry again not knowing what you're doing, you are very likely not to have telephone service at all.

http://ewebsmith.com/finance/RUS.html
http://ewebsmith.com/documents/dsl.doc

[Geovan]

yikes. if Obama plays ball yet again with the big telcos(he voted for immunity despite them wiretapping), i see a sad future for these creative and successful small businesses.

[JNagarya]

You beleive that "small-is-better" hokum? Then I've a non-existent bridge-to-nowhere you'll love to buy from me at ridiculously inflated price.

The taxpayer funded the research that resulted in the Internet. That means we the taxpayer OWN the Internet -- it is PUBLIC PROPERTY.

The idea that we should be paying private corporations for access to that which we OWN is ABSURD, and indefensible.

Free the Internet!