Policy and regulation

USA Today has an article about Lafayette, Louisiana, which has been trying to put together a community fiber project for the past year. The southern Louisiana community has apparently been beaten down by BellSouth, which has vigorously opposed the deal.

BellSouth has claimed it is "unfair" for communities to offer a service the company could offer, even though it provides only DSL in the community, a pale shadow of the robust fiber network the city was planning.

At the risk of boring my regular readers, there are two ways to approach community telecom projects. One is to regard telecom infrastructure just like roads. Communities build the roads, but private companies (like BellSouth) deliver services (like dialtone or TV programming) to customers. The other approach is to regard telecom infrastructure like the municipal water or electric system, in which the city itself provides the customer services.

The latter is certainly more efficient, but given that many of our elected leaders still don't take any of this very seriously and given that we have a ridiculously complex regulatory environment, I think the former approach (a public/private partnership) is the only alternative.

Rightly or wrongly, communities that are trying to create public monopolies in this area are losing. The telecoms are outspending them and are buying whatever laws are needed to prevent community investments. But communities must invest to stay viable in the global economy, and Lafayette knows that. From the article:

"The future of Lafayette shouldn't be left to the whim of the big telecommunications companies, insists City Parish President Joey Durel. Installing fiber-optic cable, he credibly argues, is no different from laying down sidewalks or sewer lines.

In fact, the "triple play" plan mirrors the action Lafayette's city fathers took a century ago when they realized the private power companies were passing them by in favor of larger, more lucrative markets in Baton Rouge and New Orleans. To survive, they built their own municipal power system.

Consumer's Union, the publisher of Consumer Reports, has a site called Hear Us Now that has some useful information on policy and regulatory telecom issues that affect consumers. Among the topics on the home page are cell phone lockdowns, which is the scam used by cellphone companies to force you to buy new phones even if you have a perfectly good one already. CU estimates 100 million cellphones are discarded each year just in the U.S., which is an appalling waste of resources.

Here is an excellent multi-page opinion article that discusses the plight of towns and cities in light of the recent Pennsylvania legislation that forces communities to ask Verizon's permission to develop broadband systems.

The City of Philadelphia has been much in the technology news lately because of its ambitious plans to offer wireless broadband throughout much of the city. It's now back in the news with its announcement that it will fight a statewide ban on municipalities offering Internet access and related services.

It's hard to know which way the wind blows in the corridors of the FCC. Hard on the heels of thoughtful rulings on the future of VoIP, the FCC has turned around and claimed jurisdiction over, well, everything digital, including your computer. That's the conclusion of a lot of interested parties, anyway.

The current gasoline being thrown on this fire is the Broadcast Flag mandated by the FCC to be supported on all TVs beginning with sets manufactured next year (right around the corner). The broadcast flag is a bit that tells the set or recording device that the content (i.e a television program, movie, etc.) cannot be copied.

The thinking here was that digital TV would never take off unless the content creators (the giant media companies) were protected against rampant piracy. As the Ars Technical article notes, the FCC continues to be too easily influenced by the incumbent media companies, and tends to pay too little attention to consumer interests.

I have to agree. I don't see that Congress has directed the FCC to "make sure the big media companies don't suffer any competition." The FCC ought to be seeking to create a level playing field for all content providers, large and small. Secondarily, the notion that consumers are just a bunch of thieving pirates is not only extraordinarily small-minded, there is absolutely no evidence to support it. VCRs, twenty-five years ago, were going to kill the movie industry. Now movie makers make more from selling recorded movies than they typically make in theatre box office receipts.

We have a more recent example in the music industry. Even while music industry groups continue to sue consumers for filesharing, they are making hundreds of millions of dollars on legal music downloads. Why is the FCC falling for this nonsense?

New technology and new delivery systems for entertainment always create a period of displacement; it's the beauty of creative destruction. Time after time, we have seen new and bigger markets (and new job and work opportunities) emerge out of the ashes of old businesses. As a country, why are we trying to preserve the near monopoly status of buggy whip makers?

There is a fair amount of disinformation being bandied about on the issue of community-managed telecom infrastructure. Read this article [link no longer available] by the deceptively name "Heartland Institute" for an example of a very one-sided view of community investments in telecom.

In a deeply disturbing ruling, the National Transportation Safety Board has ruled that car manufacturers must put black box data recorders in new cars and trucks. The boxes will record speed, acceleration, braking, direction, and other data that could be used to reconstruct accidents, among other things.

The FCC released another ruling on VoIP. The Federal Communications Commission has barred states from imposing telecom regulations on Voice over IP telephony providers.

This story says the FCC is interested in regulating VoIP [link no longer available].

BPL has the green light from the FCC. The NewsFactor has an article that goes into more detail. I have to agree with the conclusions the author makes--BPL is not likely to be a major factor for rural communities. Like DSL and cable modems, you have to have a critical mass of customers to justify the expense of the equipment.

Bob Rowe, from the Montana Public Service Commission, is the first speaker in this session.

Rowe says that states have a role in assisting regional deployment of infrastructure and to coordinate facilities permitting.

Local governments have much potential, and can do training, form buying pools, encourage local government investments in infrastructure, and promote egovernment.

The FCC Section 706 Report from September, 2004 notes that the FCC defines broadband as 200 kilobits/second or faster, that the US still lags the rest of the world in broadband deployment, and that the FCC has a mission to encourage "reasonable and timely deployment."

Bill Gillis, from the Center to Bridge the Digital Divide, is the next speaker. Gillis says that we can learn from "innovation businesses."

He says that an innovation business is knowledge intensive, makes extensive use of technology, is creative and flexible with respect o workforce functions, has a global business perspective, and has entrepreneurial management.

Gillis says that states can facilitate exchange of ideas, help the last 30% of residents that do not have broadband service, can help prepare the workforce for the innovation economy, and provide flexible gap capital. Innovation businesses are driving demand for broadband in rural areas.

The final speaker is Al Hammond, from the Santa Clara School of Law and the Alliance for Public Technology.

Hammond says that large parts of rural America lack adequate broadband services, with smaller towns at a real disavantage--only 5% of towns of 10,000 population or less have broadband.

BPL (Broadband over Power Lines) is getting a lot of interest. There are more electric lines to homes and businesses than phone lines, so BPL potentially can be widely deployed. At least 5 companies are manufacturing BPL equipment.

25 million homes have no cable modem or DSL service, and satellite broadband is becoming more affordable, with Wild Blue, a new statellite company, will be offering Internet access for about $50/month. TV programming will also be available, unlike some other satellite broadband systems.

I'm at the Rural Telecommunications Congress 8th Annual Conference.

Dr. Tony Wilhelm is the Director of TOP (Technologies Opportunities Program) at the Department of Commerce.

Wilhelm is emphasizing the need to tie technology investments to identified community needs. TOP does not fund infrastructure, it funds applications that use infrastructure to improve communities.

Demand for broadband is outstripping available funds. Demand exists because every facet of communities--first responders, businesses, citizens, local government--have a need for broadband.

Small businesses are using virtual business incubators, some funded by TOP, to help these businesses expand into international markets.

TOP priorities include economic development. Special emphasis this year is on broadband wireless technologies. Wireless projects are growing very rapidly. The third priority is to support faith-based initiatives. Some faith-based projects have included entrepreneurship development, sustainable economic development, and business ecommerce training.

TOP looks for projects that use technology creatively to help communities prosper. A major stumbling block for rural communities is lack of affordable broadband service. The Sevier River project in Utah has dramatically increased available water by providing more timely information to water managers. TOP looks for "infomation" projects that don't just automate (replacing people with technology). Infomation projects go beyond automation to provide leaders and decisionmakers with better tools to manage information and to solve problems.

Technology investments have created about half the productivity gains in the U.S. in recent years.

Successful TOP projects typically include:

• Organizational capacity and leadership
• Robust partnerships
• Sustainability after the funding ends

Best predictor of success is an organization's ability to integrate new ideas and concepts--organizational maturity, not size. Leadership, leadership, leadership--solid principles and clear goals, good use of talented people, solid values clearly articulated with a willingness to take risks.

The papers have been full of stories this week about the suspension of eRate payments to schools and libraries. The FCC suspended the program because of chronic abuses by some recipients of the payments. That aside, let me point out some structural shortcomings of the effort.

• Any time some companies have to become the tax collector for the Federal government and others don't, you've created a structural and competitive inequity. Erate does exactly that.
• Erate really keeps phone bills higher than they would be otherwise, and essentially increases costs for everyone. It would be interesting to do an analysis of what a typical community pays into eRate and actually gets back in eRate payments. What if it turns out most communities pay more in than they get back? Now, one can make an argument that needy communities get more help than they would otherwise. But see my next point.
• Erate payments disaggregate the ability of the community to pool their broadband demand and negotiate lower prices. Erate takes broadband anchor tenants out of the buying pool, thereby forcing other nonprofits and businesses in the community to pay more than they would otherwise. Again, what we need are some studies that look at how much broadband is being purchased by a community in total and the potential cost savings that could be gained by communitywide broadband aggregation (note: this is an activity that should be part of a technology master plan).
• The higher cost of broadband due to disaggregation puts businesses in the community at an economic disadvantage, and affects local tax payments and the ability of those companies to grow and expand job opportunities.
• Erate delays the inevitable, which is what do the eRate institutions do when eRate goes away? Erate will go away because it is a tax on legacy phone service. Legacy phone service is dead, dead, dead. I can have a voice conversation today without using ANY kind of phone company--I don't even need a VoIP service if my calling party has compatible software.

There is a good news/bad news quality to a set of FCC press releases that went out late last week. The good news is that broadband availability in the U.S. is up significantly. The FCC says the number of broadband lines has tripled from 2001 to 2003. Cable modems have about 75% of the marketplace, with DSL far behind with 15%. All other technologies (e.g. fiber, wireless, satellite) composed 10% of the marketplace.

FCC Chairman Michael Powell is on the side of businesses and consumers when he declared:

“This is about ensuring that high-speed Internet connections aren’t treated like what they’re not: telephones. A successful appeal of this case would ultimately mean lower prices and better service for American consumers. Applying taxes, regulations and concepts from a century ago to today’s cutting-edge services will only stifle innovation and competition.”

The New York Times (registration required) has an article this morning on the FCC's decision to require VoIP service providers to implement phonetapping equipment. There will be public hearings before a final decision is made, but if the Federal government proceeds with this, it will burden the nascent industry with large costs and it will be mostly for naught.

Congressman Rick Boucher (D, Virginia) represents southwest Virginia, including Blacksburg. Boucher is guest-hosting law professor Lawrence Lessig's blog this week, and there is a cogent and fascinating discussion of the Induce Act. The Induce Act would build on the already questionable DCMA law to make it more difficult (in theory) to pirate digital media.

CNet has a terrific article on community broadband and the policy issues surrounding community development of telecom infrastructure. It's a must-read article; it's long but provides an excellent overview of community telecom landscape, including the benefits communities are seeing, the anti-competitive opposition from the big companies, and the lackluster support for these initiatives at the Federal level.

State officials in New Hampshire have announced that they have "discovered" that chat, email, and other Internet services are "two way communication" and have decided that those services fall under the umbrella of a statute written in the early nineties (before the rise of the Internet) that taxes telelphone services.

The Register reports that China continues to be the world's primary source of spam Web sites--hosting the Web sites that show up in all that email spam. The U.S. continues to be the source of most email spam.