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Democracy & Technology Blog Broadband stimulus

The proposed “American Recovery and Reinvestment Act of 2009” unveiled yesterday by House Appropriations Chair Dave Obey (D-WI) includes $1.825 billion for Broadband Deployment Grants, another $1 billion for Wireless Deployment Grants (25% to provide voice service in unserved areas and 75% to provide “advanced wireless broadband service” in underserved areas.
The bill also appropriates $2.825 billion for broadband loans, loan guarantees and grants in predominantly rural areas by the Rural Utilities Service of the Department of Agriculture.
An explanatory report accompanying the bill notes that the Communications Workers of America estimate (using a Department of Commerce model) that each $5 billion investment in broadband would result in 100,000 new jobs.
On the positive side, the loans, loan guarantees and grants would be for non-recurring costs of deploying broadband networks in rural, suburban, and urban areas. When in the past policymakers wanted to promote the deployment of legacy telephone service, they subsidized operating costs (the direct federal payments alone were in excess of $40 billion over the last 20 years).
On the negative side, the bill creates a lot of opportunities for politicians and bureaucrats to pick winners and losers, micromanage and second-guess, i.e.,

  • States wishing to participate must submit a report identifying the geographic areas of greatest need.
  • NTIA must adopt rules to ensure, among other things, that grant recipients operate broadband networks on an open access basis and adhere to the principles contained in FCC’s broadband policy statement adopted August 5, 2005.
  • Applicants must submit a cost-study, engineering plan, proposed build-out schedule and comply with “any other requirements the NTIA deems necessary.”
  • Applications will be evaluated according to whether they will increase service affordability or subscribership; enhance service for health care delivery, education, or children; contain concrete plans for enhancing computer ownership or computer literacy in the area; and whether the applicant is a recipient of at least 20 percent matching grants from state, local or private entities.

Whenever the government manages anything, there are many individual needs to look after. Government is a captive of special interests.
Even worse, the bill enshrines into the law definitions of broadband even though technology continues to evolve rapidly. The broadband infrastructure eligible for federal assistance consist of:

  • “Advanced broadband service” = at least 45 megabits per second downstream/at least 15 mbps upstream.
  • “Advanced wireless broadband service” = at least 3 mbps downstream/at least 1 mbps upstream over an end-to-end internet protocol wireless network.
  • “Basic broadband service” = at a speed of at least 5 mbps downstream/at least 1 mbps upstream.

There are two categories of people who lobby politicians to define so as to exclude: corporations who want to deny their commercial rivals access to the money, and equipment vendors who want to make everything they have already sold obsolete.
The Independent Telephone and Telecommunications Alliance, which represents mid-sized phone companies, is advocating for stimulus aid to build networks in rural areas offering download speeds of 1.5 megabits per second. This does not sound very fast, but ITTA may know better than anyone what its target customers are willing to pay for. The Communications Workers of America, incidentally, proposes 3 mbps.
The services which qualify as “Advanced broadband services” are Comcast’s DOCSIS 3.0 upgrade and Verizon’s FiOS deployment. These services, which are being built on top of each other, are not yet practical in most of the country. It was reported in October that Comcast would initially roll out the service in Boston, Philadelphia, New Hampshire and New Jersey, where Verizon was already deploying FiOS. Comcast stated in a press release that it intended to reach more than 10 major markets and pass nearly 10 million homes and businesses within several months. This is how the market works, but is it how we want to spend our tax dollars?
There is clearly a possibility that people who don’t even have access to slow broadband won’t get even that.
The bill also mandates that the FCC define the terms “underserved area” and “unserved area.” Why not?
Most troubling is that the FCC would get unlimited discretion to define “wireless open access” and “open access” within 45 days. The bill doesn’t even direct the FCC to find a reasonable and appropriate balance between some of the more obvious competing public policy objectives (one being the protection of investors who are financing the upgrade), thus there is no basis for a court to review the FCC’s final decision and throw it out if it is irrational. This is a serious mistake.
Applying an open access mandate could amount to a serious escalation in regulation. But if we want more of something, the best thing we can do is deregulate it. This is not just Republican dogma; this is bipartisan. President Clinton’s first FCC chief boasted in his memoirs that in the Omnibus Budget Reconciliation Act of 1993, passed by Al Gore’s tie-breaking Senate vote, the Democratic Congress gave the FCC authority to promote growth in the wireless industry by auctioning new licenses with “no rules attached and preempting all state regulation[;] we had totally deregulated the wireless industry.” And the average cost of a minute of cellphone use has declined from 47 to 7 cents per minute. The Clintonites knew what they were doing.

Hance Haney

Director and Senior Fellow of the Technology & Democracy Project
Hance Haney served as Director and Senior Fellow of the Technology & Democracy Project at the Discovery Institute, in Washington, D.C. Haney spent ten years as an aide to former Senator Bob Packwood (OR), and advised him in his capacity as chairman of the Senate Communications Subcommittee during the deliberations leading to the Telecommunications Act of 1996. He subsequently held various positions with the United States Telecom Association and Qwest Communications. He earned a B.A. in history from Willamette University and a J.D. from Lewis and Clark Law School in Portland, Oregon.