Levin: Competition, Local Leadership Needed to Secure America’s Broadband Future

The Federal Communications Commission is “increasingly caught up in a one-note narrative . . . of self-praise rather than focusing on providing the expertise and analytic agility necessary to adjust programs to provide bandwidth abundance to constituencies it is meant to serve.” Ouch.

This quote is from Blair Levin. Yes, that Blair Levin. He served as Chief of Staff to FCC Chairman Reed Hundt from December 1993 through October 1997. During that time he oversaw, among other matters, the implementation of the historic 1996 Telecommunications Reform Act, the first spectrum auctions, the development of digital television standards, and the Commission's Internet initiative. In 2009, he rejoined the FCC as Executive Director of the Omnibus Broadband Initiative, overseeing the development of the National Broadband Plan, a project mandated by Congress in the America Recovery and Reinvestment Act. Since leaving the FCC, Levin has become the executive director at Gig.U, an organization dedicated to accelerating the deployment of world-leading, next generation networks in the U.S. in a way that provides an opportunity to lead in the next generation of ultra high speed network services and applications.

This month, we’ve seen lots of opinion and analysis of President Barack Obama’s decision to nominate Tom Wheeler to be the next chairman of the FCC. In a San Francisco Chronicle op-ed this week, Levin, instead of joining the arguments over Wheeler’s qualifications, identifies the key question for the next FCC chair: what kinds of networks will our communities - our innovators, entrepreneurs and businesses - need to be competitive in the global economy?

Last week, we looked at President Obama’s priorities with his introduction of new FCC leadership: “giving businesses and workers the tools they need to compete in the 21st century economy, and making sure we’re staying at the cutting edge of an industry that again and again we’ve revolutionized here in America. And as technology continues to shape the way that we do business and communicate and transform the world, we want to make sure that it’s American ingenuity, American innovation, and that we’re setting up legal structures and regulatory structures that facilitate this continued growth and expansion that can create good jobs and continue to grow our economy.”

This week, Blair Levin helps us flesh that out.

In his May 5 op-ed, Levin notes that So-net Entertainment, a Japanese Internet service provider, just announced a 2 gigabit-per-second service to customers in the Tokyo region for $51 per month. That's about what the average American pays for broadband. But the average speed of United States broadband connections? It's less than 1 percent as fast.

The New York Times this week noted that it has been almost two decades since @Home Network offered perhaps the first broadband plan in the country. It was right after the 1996 Telecommunications Act allowed cable companies to get into the business. “At that time the United States was a leader in broadband,” Medin recalled. Today, he lamented, “I don’t see anybody arguing that the U.S. is anything but mediocre.”

Milo Medin, one of @Home’s co-founders, still recalls the price of the pioneering service, offered to residents of Fremont (CA): $34.95 a month — $51.85 in today’s money — for a maximum speed of 10 megabits per second. The memory inspires not a little frustration about the Internet’s progress since then: 17 years after @Home plugged in its first customer, the residents of Kansas City pay Time Warner, their local cable company, $46.90 for a 3 Mbps connection and $55.40 for a top speed of 15 Mbps. This despite the fact that the price of transporting data wholesale across the Internet has fallen to about $1.57 per Mbps, down from $1,200 when Medin was helping start @Home. And high prices discourage Americans from opting for higher speeds. Though 10 Mbps broadband is available in 90 percent of homes around the country, and four out of five homes have access to 100 Mbps service, last year only 28 percent of homes that had access to broadband at a speed above 6 Mbps actually bought it.

Levin has noted since his work on the National Broadband Plan that no U.S. Internet access provider plans to upgrade its networks to offer world-leading broadband speeds. So, even if one argues that today’s broadband networks are sufficient, will they remain globally competitive as more and more goods and services are delivered over them? Levin sees, first hand, how many U.S. communities are worried that their networks soon will not measure up.

“While no one can be certain what users will do with gigabit speeds,” said Levin, “we know that without such speed, we will not be able to take full advantage of the transformative potential of bandwidth hogs such as big data, genomic sequencing, cloud computing, or next-generation video. We know that bigger bandwidth will empower more effective ways to collaborate with co-workers, teachers, doctors and fellow citizens. We also know that without world-leading networks, the applications that drive the next generation of broadband use will be less likely to be invented here.”

Although most of the nation’s innovation today relies on a broadband connection, “Internet access is constraining what people can do,” Medin said. “This puts American companies at a disadvantage.” Most Americans are still stuck in the Internet slow lane, far from the frontier of our possibilities. And the main roadblock remains much the same as it has been for years: a lack of competition. In most American neighborhoods, consumers are stuck with a broadband monopoly. And monopolies don’t strive to offer the best, cheapest service. Rather, they use speed as a tool to discriminate by price — coaxing consumers who are willing to pay for high-speed broadband into more costly and profitable tiers.

Outgoing FCC Chairman Julius Genachowski says U.S. broadband deployment is headed in the right direction. He points to Google Fiber -- @Home’s Medin is now leading Google’s effort to deploy superspeedy 1 gigabit-per-second networks — 100 times faster than the 10 Mbps plans @Home introduced long ago — in several cities around the country, starting in Kansas City. Google offers a broadband product 20 times faster for the same price as the slower product offered by incumbent providers. Google believes it can turn a profit selling 1 Gbps service for $70 ($120 with a TV plan) offers an entirely new horizon for broadband development. It has plans under way to take the service to Austin (TX), Provo (UT), and communities around Kansas City, like Grandview, Missouri. And it is spurring a domino chain of investments. Bernstein Research released survey results this week that point to a profitable future for Google Fiber.

Chairman Genachowski also points to municipal projects around the country. Some communities - Chattanooga, Chicago, Kansas City, Seattle, Austin, Champaign-Urbana, among others - have developed public-private partnerships to beef up their broadband. Each project is different, but all are based on community strategies that lower the costs of building the network while increasing the revenue opportunities, thus attracting investors. At the same time, communities have looked at other digital issues and structured their public-private partnerships to help bring free Wi-Fi to public places or develop low-cost broadband services for their citizens.

Yet the challenge remains: monopolies have a high instinct for self-preservation. And more than half a dozen states have passed legislation limiting municipalities from building public broadband networks in competition with private businesses. South Carolina passed its version last year. A similar bill narrowly failed in Georgia. Supporting these bills, of course, are the nation’s cable and telephone companies. National Regulatory Research Institute found that AT&T has been particularly active in state-level deregulation. Twenty-five states limited or eliminated public service commission oversight of local telecom service between 2006 and the first quarter of 2012, including 16 in states where AT&T is the dominant local carrier, one Verizon state, five CenturyLink states and three Fairpoint states. Another nine states, primarily AT&T states, have legislation pending. AT&T wants to phase out its traditional voice network but may be prevented from doing so in some states until the states are deregulated.

The deregulation has occurred in two waves according to the National Regulatory Research Institute (NRRI). Initial legislation focused on getting rid of some elements of the carrier of last resort concept, which traditionally required telcos to make phone service available to anyone in their territories who wanted it. Some states also re-defined home phone service: California, for example, allows wireless phone service to meet the definition of home phone service if it works within the home. More recently telecom legislation has had a different focus: ‘Thou shalt not touch VoIP or IP-enabled services even if we haven’t defined them yet.’

Advocates of deregulation argue that regulation is no longer needed now that the telecom market has become competitive. But “what if competition goes away and how will we know?” asked NRRI principal Sherry Lichtenberg. “Is there a chance that competition will become so limited that it cannot substitute [for regulatory oversight]?”

Levin's message is that the North Star for policy ought to be faster, cheaper, better broadband. "The question at the federal level should not be how do we reallocate funds among competing constituencies but rather, how do we use the funds to drive faster, better, cheaper bandwidth into unserved and underserved areas." He says that the goal of FCC policies should be to push down the costs of upgrading broadband networks while increasing the amount of competition in the marketplace. But, as we noted in our opening, FCC veteran Blair Levin is losing faith in the Commission’s ability to enact policies that will ensure a competitive broadband future for the U.S. Here’s two of the problems he sees:

  1. The FCC has essentially “punted” on the contribution side of Universal Service Fund (USF) reform – leaving the program dependent on the increasingly unsubstainable of model of carriers’ long-distance voice revenues which continue to shrink given users’ shift to cellphones and Internet-based calling.
  2. The USF reform the FCC has implemented has actually stalled broadband investment in some areas. He cited a recent survey of small rural phone companies showing that 69% of respondents have cancelled or postponed investments due to uncertainty about restructuring.

So Levin is looking for leadership now not from the FCC, but from local leaders in partnership with companies that are willing to invest ahead of the current market. “We have reasons to have faith that mayors and governors, university presidents and CEOs of our major research hospitals, entrepreneurs and large businesses will come together to find a way so that we can lead in creating . . . abundance for their communities, for our country and the world,” he said.

Levin suggests that anchor institutions should be thinking about making their facilities -- and their broader communities -- next generation network ready. This includes building into all planning making all rights of ways and buildings fiber ready and advocating for the efficient use of federal dollars to deploy bigger bandwidth.

Moreover, Levin points to the “Race to the Top” model used by the Department of Education to spur educational reform throughout the country and suggests the FCC create a pool of funding for block grants to communities who develop the best ways of delivering connectivity in unserved and underserved areas -- providing world-class broadband at affordable rates, increasing adoption, and connecting public facilities.

We'll continue to keep an eye on broadband policy and, as always, be looking for you in the Headlines.

By Kevin Taglang.