| Mr. Windhausen will be liveblogging on OpenLeft this evening at 7 PM EDT.
Many congratulations to Sen. Durbin for instigating this "outside-the-box" discussion of broadband policies and universal service. Broadband services are more than simply an evolution of our existing telephone technology and services; broadband networks are and will fundamentally alter the way our economy functions, the way students learn, the way workers are trained, the way medical care is delivered, the way communities share information, and the way government governs. So we need to think big about our broadband policies and not fall into the trap of only trying to "fix" existing programs. I suggest that we start thinking of our overall objectives and develop a real broadband plan.
(More in 'there's more'...) |
| First, let's establish that our goal should be broadband deployment to 100% of American homes. And let's assume that by broadband we mean more than the current generation of technologies (such as DSL and wireless 3G), which are becoming unsatisfactory because of the increasing demand for video (which uses more bandwidth than web browsing or e-mail).
Second, let's acknowledge that broadband deployment is expensive. Using "back-of-the envelope" calculations, let's assume it costs about $2,000 per home to deploy fiber to the home (Verizon is doing this for somewhat less per home, but its deployment is not in rural areas). With 115 million households in the U.S., it will cost about $230 billion to deploy fiber to every home. This is too much money for the federal government to build these networks on its own. We will need to rely upon the industry to fund the bulk of this expense, while using government to "prime" the market.
To encourage greater industry investment, we need to consider policies that combine rewards for the private sector for investing while also ensuring that the broadband pipes remain open and affordable. This is a delicate balance, but both are necessary. The private sector can be given accelerated depreciation, investment tax credits, and matching grants (such as in Idaho) to promote investment. But a big broadband pipe is useless if you can't use it as you wish. So, the companies receiving these benefits must serve the public -- they must permit entrepreneurs and and service providers to have access to the network. Our European colleagues have leaped ahead of the U.S. in broadband deployment by adopting an open regime. They have shown that greater usage stimulates greater investment.
The federal government can also seed the market with funding of its own to supplement spending by the private sector. Unfortunately, the existing government programs are not all that well-equipped for this purpose. The Broadband Loan program administered by the Rural Utility Service is hampered because by the fact that it primarily consists of loans, not grants. The application process is exceedingly difficult, largely because applications must demonstrate enough financial strength to be able to pay the loan back. Those who can get the loans may be the companies who need them least. On the other hand, the federal Universal Service Fund is about $7 billion, and about $4 billion of this goes to subsidize high-cost (mainly rural) areas. While $4 billion may seem like a lot of money, it's a pittance compared to what we need to attain the goal of universal broadband. Furthermore, some of this $4 billion goes simply to maintaining the existing copper telephone network and is not devoted to broadband deployment. While some advocates are focused on "fixing" or "reforming" the existing universal service program to focus more on broadband, consider whether that is worth the monetary and political capital. The existing programs are replete with arcane rules and entrenched interests that will fight hard to retain them.
Rather, it may be smarter to create a new program focused solely on broadband deployment. Recipients of the funding must demonstrate that they will build networks providing at least 100 Mbps to the home and preference would be given to rural areas. A $10 billion program per year could be funded from general revenues, from excess spectrum auction revenues, or from a $1.50 monthly fee on every phone bill. Finally, since the program would focus on the up-front costs of deployment, not annual maintenance, the program could sunset once its mission is accomplished.
This proposal may or may not be feasible, but perhaps it will provoke even better ideas geared to make broadband a reality.
John Windhausen, Jr. has worked in the communications policy arena in Washington, D.C. for over 20 years. He served as senior counsel to Senator Hollings, Senator Inouye, and the Democrats on the U.S. Senate Commerce Committee. He participated in the drafting and passage of the 1992 Cable Act, the 1993 Spectrum Auction Act, and the Telecommunications Act of 1996. He also served as President of the Association for Local Telecommunications Services (ALTS), where he helped lead the facilities-based local telecom industry in upholding the pro-competitive principles embodied in the Telecommunications Act. He recently started Telepoly.com, a new informational web site on communications policies. |
