Thursday, January 29, 2009

The Right Kind of Broadband Stimulus

In my view, the spending side of the House-passed stimulus bill is too large. Be that as it may, appropriating some funds targeted for furthering broadband deployment is a more worthwhile use of the public funds than many of the other targeted appropriations.

Still, with respect to broadband the bill could and should be improved, including in these ways:

  • Funds should only be allocated for build-outs in unserved areas, rather than for underserved areas as well. We know that about 90-92% of homes already are passed by a broadband provider. The focus should be on the remaining 8-10% that do not have access to any service (except satellite broadband). Under the bill, the FCC is tasked with defining an "unserved" area within 45 days. This is likely to be a very messy and contentious process.
  • The bill requires that NTIA ensure that grant recipients operate on an "open access" basis. The term "open access" is to be defined by the FCC not later than 45 days after enactment of the bill. Without belaboring the point, the stimulus bill is no place to effect what may be a far-reaching change in broadband policy. In effect, any definition of "open access" adopted by the FCC almost certainly will move broadband policy further in the direction of the traditional legacy common carrier regulation that prevailed in the last century. The "open access" label is no doubt appealing. But adopting open access as a mandatory condition, and then going through the process of defining what it means, and then going through the further process of implementing and enforcing whatever the regulator decides it means on any given day, inevitably will lead to a regulatory straightjacketing that will discourage investment and innovation. To put it plainly, "closed access" regimes, or what we frequently call proprietary systems, often spur innovation and investment in ways that mandated open regimes cannot. This is because the protection of property rights in proprietary regimes offers the prospect for realization of economic efficiencies that otherwise cannot be captured. In any event, having the FCC devise an open access rule in 45 days is no way to address the very significant issues involved. If our nation's policymakers think the government should impose open access mandates, the issue is consequential enough it should be considered outside of the appropriations process.
  • The recent report from the Pew Internet & American Life Project, authored by John Horrigan, once again focused attention on the fact that there are a number of reasons why Americans don't subscribe to broadband service even when it is available. While by no means the predominant reason, for a significant number of Americans price is a factor. Thus, as FSF Research Assistant Tristan Hardy suggested in his recent blog, it may make sense to direct some public funds to expand the Lifeline/Linkup programs to include support for broadband for low-income Americans who meet certain low income means-based criteria.

As the stimulus bill moves through the legislative process. it should be improved in these ways.

Friday, January 23, 2009

Broadband Availability Does Not Necessarily Imply Adoption

Although all of the details of the economic stimulus package have yet to surface, it seems likely to target billions of dollars of government spending towards increasing deployment of broadband infrastructure. Ubiquitous broadband is a worthy goal. But making broadband services available does not necessarily mean that consumers will subscribe. There is a difference between encouraging broadband infrastructure deployment and encouraging broadband subscription rates – and policies should not ignore this difference.

First, it is important to note that, despite the reflexive proclivity of some to try to characterize United States broadband policy as a failure, much progress regarding deployment continues to be made. Last week, the FCC released its semi-annual report on High-Speed Services for Internet Access (the full report is available here) detailing the broadband deployment figures through December 31, 2007. Despite the extensive time lag in compiling and reporting the data, the FCC report makes clear that broadband availability and consumer adoption rates continue to increase. In 2007, high-speed lines connecting homes and businesses to the Internet increased by 46% from 82.8 million lines to 121.2 million lines. The report found that over 99% of the U.S. population lives in a zip code that has access to a high-speed connection through a number of competing technologies, including high-speed mobile wireless, satellite, ADSL, and cable modem service. 98% of the population lives in a zip code with two or more broadband providers.

Would even greater broadband availability in unserved areas actually encourage some consumers presently without broadband service to sign up? Sure, to some extent -- but deployment is only one part of the broadband equation. In a newly-released memo entitled "Obama's Online Opportunities II," John Horrigan, Associate Director for Research at the Pew Internet & American Life Project, considered the effectiveness of an economic stimulus package on increasing the actual pool of broadband subscribers. Based on his survey data, only about one-third of the U.S. adult population has failed to adopt broadband at home due to pricing or availability issues. According to Horrigan, "[p]roviding incentives to build broadband infrastructure directly addresses the availability problem and could be of particular help to Americans living in rural areas." However, the other two-thirds of adults cited issues related to the usability and relevancy of broadband to justify their decision not to subscribe. Truly, the generational gap plays a significant role and, as Horrigan pointed out, "it would take time to undertake the training and support needed to turn [older users] into competent online users." Horrigan suggests these take-up issues seem better suited for private sector solutions, such as making services easier to use or revising marketing efforts to better target these individuals.

If the ultimate goal of the nation's broadband policy is to increase broadband usage rates, this will not be accomplished in the most economically efficient or practically effective manner by focusing only on increasing spending on broadband infrastructure, and certainly not by directing scarce public funds to areas other than those unserved. In connection with government efforts to stimulate broadband investment, policymakers should narrowly target public funds to unserved areas. As for adoption, one possible suggestion is to expand the Lifeline and Link-up programs in order to subsidize home broadband access for those who meet well-defined low income means criteria.

In any event, as various stimulus proposals are considered, it is important to keep in mind the significant progress that already has been achieved as a result of private sector investment and a generally deregulatory environment. (More on any regulatory conditions in the stimulus bill later.) And, it is important to keep in mind as well that a significant number of consumers are just not interested in subscribing to high-speed Internet access at this time even though broadband is available to them. An economic stimulus package directed at increasing broadband availability, or even at pricing, will do nothing to change their minds.

Tuesday, January 13, 2009

Don't Delay the DTV Transition

The mere suggestion by President-elect Obama's transition team that the February 17 DTV transition date be postponed has already made the prospect of the analog TV cutoff more problematic than it otherwise would be. Human nature being what it is, many people who either were already readying themselves for the switch – or were about to rouse themselves to get ready for the switch – have or will stop dead in their tracks. Why get a converter box and hook it up now if nothing is going to happen for at least several months?

Despite all of Ben Franklin's admonitions ("A stitch in time…") and those since, procrastination is a powerful element of human nature.

Even though the suggestion that the cutoff date be delayed already has created some confusion, it seems to me, all things considered, that the preferable course still is to quash the delay talk and go forward with the February 17 implementation date. First, and most importantly, consider human nature again. If the government postpones the date, despite any and all protestations to the contrary ("Believe me this time when I say your analog signal will be cut off!), a large number of people won't take seriously any new date. After all, let's be honest: For many months now, it has been difficult for most of us to avoid the barrage of warnings concerning the February 17 transition date.

No doubt the DTV transition program - from awarding coupons to government education to manning call centers - could have been done better. But, in truth, much has already been accomplished by many in preparing for the cutoff. The focus now should be forward-looking, with efforts directed to making the February 17 date work as well as possible. For example, legislation could be passed allowing the NTIA to issue a reasonable number of additional coupons even before current coupons expire in recognition that the redemption rate will not be 100 percent. If need be, consideration can be given to appropriating more funds for even more coupons. More people can be hired to man the call centers and so forth.

Postponement of the implementation date jeopardizes the accomplishment of important public policy objectives. It almost certainly would delay getting a portion of the to-be-vacated spectrum into the hands of public safety agencies. And it almost certainly will delay use of the to-be-vacated spectrum for deployment of new next generation wireless broadband services. Indeed, President-elect Obama has been especially vocal about his desire to promote more broadband deployment.

Even with the best efforts, and regardless of when the cutoff takes place, there will always be some (unknowable and uncountable) number of people who will not be ready, no matter the efforts made by the private sector and the government. I do not mean to minimize the disruption and inconvenience to these people. And I understand that the people who will not be prepared at cutoff are, on the whole, perhaps more likely to be less well off than those who will be ready. (Of course, in a very (over)broad sense, the coupon program is intended to address concerns about any economic hardships associated with the transition.)

At bottom, having long ago committed to a firm date, it seems to me the best course is to continue to make an all-out effort to make the transition work as smoothly as possible, understanding that, inevitably, there will be a real need to address special problems and needs for several weeks in the aftermath. It was always predictable that there would need to be some period of intense post-cutoff attention and assistance.

Finally, President-elect Obama has proven to be a very effective communicator. And, at times, he has rightly emphasized the need for our citizens to exercise more personal responsibility, and he has extolled the need for common efforts to achieve a public good. There is a large element of the common public good, of course, in implementing the DTV transition and freeing up the analog spectrum sooner rather than later. And assumption of personal responsibility plays a significant role in accomplishing the transition with as little disruption as possible.

President-elect Obama has many important matters on his plate, many of greater import than the DTV transition. But I have the sense that, with Mr. Obama's eloquence, if he were to utter a few choice words of encouragement, perhaps even a call to action in his inaugural address, we can get over the February 17 finish line in better fashion than now envisioned.