November 2009 Archives

What We Can Be Thankful For About Broadband In America

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Beyond eating criminal amounts of turkey, mashed potatoes, and pumpkin pie, Thanksgiving is the time of year we're supposed to give thanks for what we have.

To that end, I wanted to take a moment to point out the facets of America's broadband ecosystem that we can be thankful for.

First off, we should be thankful for the abundance of long-haul and intercontinental fiber that runs through and from the US. Not every country has that. Take Africa, for example. As a result of not having access to big fiber pipes, their broadband is constrained and expensive, keeping it out of reach for the majority of its people.

The fact that most Americans do have access to multi-megabit broadband is another reason to give thanks. It may not be what we want in terms of speed or price, but it's there.

The same is true of wireless coverage. While we may be lagging behind some other countries, what we do have is better than nothing, and ever since I got my iPhone I've become increasingly thankful for this.

We should be thankful for all the ways that we're starting to realize the societal benefits of using broadband, though we also need to realize that we have a long ways to go before we're maximizing those benefits.

While the digital divide is still there, the fact that most everyone has the ability to go to a library or other public computing center to get online is another reason to give thanks, though we need to be doing everything we can to get them more bandwidth and more computers so they can keep up with demand.

I'm grateful that America is still home to the world's biggest and best Internet companies, though I'll admit some trepidation as to how long it's going to stay that way if we continue to lag behind the world's leading broadband nations.

I'm especially thankful that fiber continues to be deploying all the way to homes across the US, with a number of innovative models either being proven or poised to do so that will open up new avenues for large-scale fiber deployment. I'm hopeful that we'll have even more to be thankful for next year, but there are no guarantees that this will be the case as it's still uncertain whether our government is ready to step up and fully support this paradigm shift in the technology and business model of broadband.

What we should be most thankful for, though, is that we're finally in the midst of turning good intentions into action through the creation of a national broadband plan. The fact that we're at least doing something is terrific. Whether or not that means we're going to end up with a transformative plan of attack or merely some suggestions for small incremental improvements remains to be seen.

In no way am I satisfied with the state of America's broadband ecosystem. But it's important to take a moment and recognize what we have to be thankful for. Because while things could always be better, we shouldn't gloss over the good that we already have.

So on this Thanksgiving, ask yourself this question: what are you thankful for about the state of broadband in America?

As I argued last week, the second round of the broadband stimulus is in trouble if the only changes it makes are expanding eligibility and extending the time available to apply. NTIA and RUS have had enough trouble dealing with 2,200 applications; it's worrisome to think what might happen if 10,000 show up on their doorstep in round two.

I'm not trying to suggest that eligibility shouldn't be expanded, just that we also need to find solutions for streamlining the approval process and getting money out the door more quickly. But we do have to be careful as we need to make sure we only fund the right projects and that we maximize the impact of taxpayer dollars.

To this end, let me suggest that the best way to streamline the second round of RUS's BIP program is to introduce a fast-track partial loan guarantee program. (We'll deal with how to improve NTIA at a later date.)

As a refresher, in the stimulus language they specifically cite that this money can be used for grants, loans, and loan guarantees. RUS has an existing loan guarantee program, only it's never been used for broadband. Why? Two reasons:

1. The 80% guarantee from dollar one of losses hasn't been enough to incentivize private capital.

2. It takes just as long to get a guarantee as a direct loan, and a direct loan will always have a lower interest rate.

Yet guarantees have many advantages as a tool for turning dollars into deployment.

Compared to grants, guarantees have the advantage of leverage. You only have to budget for a fraction of whatever guarantees you hand out. Whereas a dollar of budget authority can only deliver a dollar of grants, that same dollar of budget authority can be turned into ten to twenty dollars of guarantees.

Government loans offer the same opportunities for leverage, but with guarantees government doesn't have to write a check and it's able to share the risk with private capital.

Put simply: loan guarantees are one of the best options to stimulate broadband deployment, and yet to date we've been ignoring them.

So how can loan guarantees be used to streamline the second round of RUS's BIP program?

It starts by making two changes to the guarantee program:

1. Change the guarantees to cover 100% of losses up to 50% of the value of the loan.
(We've spoken with private capital sources and have been told that with guarantees like this private capital will start flowing to rural broadband projects.)

2. Institute a fast-track approval process.

The basis for implementing a new fast-track approval process is the fact that if you have a private capital source writing a check for the full amount of a loan and taking on half the risk then you can assume that that lender has done a thorough job vetting the financial viability of a project.

What this can then mean is that RUS no longer has to vet every last detail of every last project. Instead they can implement an approval process based on a simple checklist whereby projects seeking guarantees only have to show that they have all the necessary components in place to take a guarantee to the private capital markets to raise their funds, like a proven management team, an execution strategy for deployment, a marketing plan, and so on.

With this new approval process, guarantees could be going out the door in a matter of weeks or even days, rather than the many months it's taking to vet and approve grant and loan applications.

This fast-track partial loan guarantee program also allows funds to be made available on an on-demand basis. So instead of lumping everyone together, those projects that are truly market-ready now can get a guarantee, raise their capital, and start deploying rather than having to wait for the gears of government to chew through thousands of applications.

To actually implement this program RUS should set aside $100 million in budget authority for fast-track partial loan guarantees. Make the guarantees available on a first-come-first-served basis. And open up the program the same day you put out the NOFA for round two.

In this way projects can start getting guarantees by February, can have their capital raised by April, and be deploying by May, if not sooner. Compare that to the current strategy where it's likely that no money's going out the door for round two until July at the earliest, and possibly not until the fall, forcing northern states to miss out on another year of deployment opportunity.

That $100 million should also be a floor rather than a ceiling. If the program's successful at turning $100 million of budget authority into $2-4 billion in private capital then why not allocate more resources to it? Especially since there's a chance that this initial $100 million in budget authority could be distributed as guarantees before any money has gone out as grants or loans. Conversely if the program's not successful at incentivizing private capital to invest, then you can always just roll this budget back into grants and loans.

In terms of eligibility, it's important that these guarantees are able to be applied to any form of capital. We want to be encouraging an all-hands-on-deck approach towards finding capital sources that are ready, willing, and able to invest in rural America's broadband future.

In terms of what kinds of projects should get these guarantees, it's crucial that we're focused primarily on the kinds of networks that can support rural America's long-term connectivity needs. That's why these guarantees should prioritize projects that deliver leading edge vs. lagging edge technologies, that have plans to continually invest in improving their networks, and that feature open access models so that even if a rural home only has one broadband pipe, that pipe can still deliver them the benefits of robust competition between service providers.

In terms of what areas should get guarantees, it's important we don't limit our definition of rural too much. What we need to be encouraging are large-scale deployments that can serve more densely populated areas in order to balance out the less dense. One idea to encourage projects to reach further and further out into the hinterlands is to tie the percentage of the guarantee to the density of the project. The lower the density the higher the guarantee that can be received, and therefore the lower the interest rate that'll ultimately be paid on the federally guaranteed loan.

There are other ways to take advantage of this overarching concept of using government dollars as credit enhancers, but this proposal for fast-track partial loan guarantees is something that can be implemented now. These guarantees will free up more capital than grants more quickly than loans with less risk. These guarantees will unleash the private capital markets while streamlining RUS's approval process so that money can get out the door sooner rather than later.

As RUS goes about revamping BIP for round two, it must be thinking in terms not just of how to expand eligibility, but also how to be more effective and efficient with how they spend their money. And there's no better way to spend taxpayer dollars on broadband than through a fast-track partial loan guarantee program.

FCC Gets Down To Brass Tacks On Fiber

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Yesterday the FCC featured what I found to be the most interesting, insightful, and in-depth broadband workshop yet on the topic of advanced fiber architectures. Organized and moderated by David Isenberg, this wide-ranging discussion brought up a number of excellent points worth reiterating. You can watch video of the workshop here. Here's a sampling paraphrased, grouped by speaker, and commented on:

David Lynch, Verizon CTO
- Every six years there's a ten times increase in bandwidth usage.
(This aligns well with my proposal for logarithmic bandwidth goals of 1Mbps, 10Mbps, 100Mbps, 1Gbps, etc.)

- The FCC can't find me enough spectrum to make up for the capacity of fiber.
(In other words, we'll never live in a world without wires. Instead what we want is a world where wireless can live up to its full potential because of the universal availability of fiber backhaul.)

- FiOS customers average three to four times greater bandwidth usage than DSL customers.
(Morale of this story: users will fill whatever pipe is given to them. In other words supply drives demand.)

- Every wireless carrier has a vision to get fiber backhaul to all wireless towers.
(What was even more interesting was his suggestion that 40% of Verizon's wireless towers already have fiber, and that he thought the percentage industrywide was likely similar. That's more than the 20% estimates I'd heard before, but still shows there's a long way to go.)

Joanne Hovis, Columbia Telecommunications Corporation
- In Montgomery County schools connected to a community-owned fiber network are getting access to 100Mbps speeds and paying $71 per Mbps per month, whereas neighboring schools not on the network are paying $2,000 a month for T1 service at 1.54Mbps, and that price is subsidized by matching e-rate funds of an additional $2,000 a month.
(Put another way, schools on T1s are paying over $2,500 per Mbps per month. That's not sustainable or acceptable.)

Tim Nulty, ECFiber
- Rural networks are better if owned by non-profit-maximizing entities.
(I've been seeing a similar pattern elsewhere. When a rural community gets fiber it's inevitably done by non-profit or low-profit means. In rural communities where the only service providers are profit-maximizing their service is lagging as it doesn't make sense for multi-state carriers to invest money in less profitable areas. Rural broadband can work, but only if the solution is focused primarily on serving community needs and not on maximizing profit.)

- Open access is better for rural America because it allows for competition.
(This is an important point. Facilities-based competition might work in markets that already have multiple networks or that can support the deployment of multiple networks. Rural areas are lucky to have one network, and often aren't big enough to support the deployment of new networks. So if you want rural America to realize the benefits of competition, then you have to be encouraging open access networks.)

- With USF, we could build fiber to all of rural America in the next three years.
(While a bold statement and a monumental challenge to tackle if given the opportunity, there's definite truth in what Tim says. As I've been saying repeatedly, if we could reallocate the $7 billion a year in USF funding to a loan or loan guarantee program, we could free up the tens and hundreds of billions of dollars needed to get the job done. And while there's still a lot of work to do, there are at least dozens of people the country ready to get to work deploying far and wide in rural America if sufficient funds were made available. So I hope as we get into USF reform we don't just consider incremental steps but instead look at this as an opportunity to take bold steps to insure rural America's future.)

Benoit Felton, Yankee Group analyst
- Once you've deployed the network the key is getting as many people onto it as possible.
(This runs counter to the notion of trying to squeeze as much revenue as possible from each individual customer. Instead the point is that once you've sunk the cost into building the network the key to success is how many people you can get using it. Then with that baseline you can work on increasing how much profit is driven from each user.)

- People aren't being offered different things to do on fiber yet.
(This is a really important issue for any who's a fiber advocate. We need to be encouraging more innovation in terms of what can be done with fiber. We need to be able to show why fiber matters, not just talk about it in the abstract.)

Herman Wagter, CityNet Amsterdam
- People are setting up home servers and opening up home-based businesses.
(This is a very interesting happening as it shows what can happen when you have lots of upload capacity and broadband connections that you can rely on. This is what the next generation of the Internet looks like, where we're no longer limited by the last-mile bottleneck.)


Lots more interesting things were said at this event, and it left me quite hopeful that this dialog around the creation of a national broadband plan is moving past where these conversations have usually got hung up. This workshop pushed aside the veil of technology neutrality and pointed out the differences between technologies. And it facilitated a frank, civil discussion about the real solutions that are needed to improve our country's broadband future.

So color me optimistic as we head into a beautiful fall weekend!

Second Round Of Stimulus Already Headed For Disaster

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With the finish line for round one of the broadband stimulus being pushed back even further, I'm already growing increasingly concerned about the fate of the second round.

To review, the NOFA for the first round came out in July. By August it had attracted 2,200 applications. It's now November and the only applications that have been approved are a handful of mapping projects, and the whole of the first round of funding won't be completed until February, six months after the applications were submitted.

The official response for why the timeline for getting money out the door has lengthened is the overwhelming response the program got: 2,200 applications that collectively requested seven times the funds that were made available.

Now, before the first round has had a chance to run its course, NTIA and RUS are asking for suggestions on how they can improve this process for the second round of funding.

So far, the vast majority of the discussion around what needs to be improved in this process relates to one of three things:

1. Eligibility criteria that were too narrow.
2. Applications that were too complicated.
3. Not enough time for applications to be completed.

What no one seems to be acknowledging is that if the only tweaks that are made to this process are incremental steps to allow more people more time to more easily apply, then there's going to be a lot more applications to review in round two. It wouldn't surprise me if the total topped 5,000; I don't think 10,000 is even out of the realm of possibility.

Exasperating this is that NTIA has been quoted as encouraging anyone who doesn't get funding in this round to reapply for the next round. Given that only a quarter of the funds requested in the first round will be filled, that likely means a minimum of 1,650 applications will likely reappear, even though some of them almost certainly aren't deserving of taxpayer dollars.

Now let's revisit the timelines for round two.

The request for comment on how to improve the process is out now and closes next week.

Best-case scenario for getting the next NOFA out would be January, and February's more likely given the holidays and the need to not create uncertainty for projects that haven't been chosen yet by January in terms of if they should be getting their applications for round two ready or not.

It seems likely they'll extend the application period a month so as to allow applicants more time to collect the necessary information, so that leaves the door open until March or April.

Now we need to remember that all the funds must be allocated by September of next year, which is less than half a year from the point the door closes for applications for round two. (As a quick aside, this demonstrates how there was no chance they could've fit a third round into the remaining time, which was likely a driving force behind why they consolidated rounds two and three.)

That's less than half a year to get through a stack of applications that could be towering. Not to mention the related increase in challenges by incumbents to the eligibility of projects based on existing competition (unless they radically change the eligibility rules, which will inexorably lead to another increase in applications).

I do give them the fact that in round one they were having to ramp up from 0 to 60 in terms of the capacity to review these applications, so that will be an advantage for round two as they'll already have momentum. But this will still be a massive challenge to overcome, and the best-case scenario I can see is money not starting to be awarded until July on a rolling basis until September.

Then we need to add on whatever time it'll take for grant awards to translate into checks actually going out the door and into the hands of applicants. That could easily take another couple of months.

So now we're talking about money from the second round not actually getting into people's hands until at least Sept of next year. You know what that means? Another year of opportunity to deploy broadband in northern states will have been wasted. It's hard to start turning dirt when the ground's frozen.

Having been born and raised in Minnesota, and being a true believer in the power of broadband, it's hard not to get aggravated thinking that billions of dollars appropriated to "stimulate" broadband in February 2009 might not turn into actual deployment and job creation in the northern US until spring of 2011.

And given the struggles that have come with trying to process the 2,200 applications of round one expediently, it's hard not to get really worried about what's going to happen when an even larger amount of applications plop on the front doorstep of NTIA and RUS next spring for round two.

The inescapable reality of all this to me is that if we want to have any shot of round two stimulating broadband in any meaningful way in 2010, then we need to be thinking about ways to streamline the approval process that don't just focus on making it easier for more people to apply.

We need to be thinking outside of the box and seeing if there are ways to funnel stimulus dollars to the right projects more efficiently and effectively, both so we can lessen the load on NTIA and RUS and so as to get projects deploying sooner rather than later.

Because otherwise, I can't help but feel like the second round of the stimulus is already headed for disaster before it's really even had a chance to begin.

A Realistic Estimate for Building a 100Mbps Nation

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One of the challenges advocates of a 100Mbps Nation have faced has been the lack of an accurate estimate for what it will cost to achieve our goal. The FCC suggested that achieving a universal 100Mbps Nation would cost $350 billion, but some recent calculations by Dave Russell of Calix have shown that we can achieve a Full Fiber Nation, which should be able to enable a 1Gbps Nation and beyond, for less than that.

Before getting into his specific numbers, though, I want to point out something that he did that I think makes a lot of sense and helps frame this discussion in a more realistic way.

While I often talk about the goal of a fiber pipe to every last home, that will probably never happen. There are some homes that are so remote that there will likely never be a business case to justify the investment required to serve them with fiber. And too often debates around universal service get bogged down in the extra high cost of serving the extremely remote. So he cut them out of the estimate, which has a profound effect on it.

He highlights how areas with less than one home per square mile represent 27% of America's landmass, and areas with one to five homes per square mile cover another 23%. If an area has less than five homes per square mile, they're probably not going to be able to support a fiber network.

If you combine these two together you end up taking 50% of America's area off the table from having to worry about wiring with fiber to the home. Yet that combined area only contains 2% of America's population.

While I'd love to see every last American have the benefits of fiber available, 2% is a number I can live with if it means that 98% of America can use it.

And the other benefit of doing this is that you've now doubled the overall density of the rest of America, which puts us more on par with other nations whose higher density has often been credited as giving them an advantage over the challenges America faces in getting itself wired.

Dave then uses cost estimates for deploying fiber to different types of communities from Verizon, Hiawatha Broadband, and Jaguar Communications to come up with an overall estimate of $206 billion to bring fiber to 98% of Americans.

That's still obviously a massive number, which doesn't include the cost of a wireless cloud or of getting that last 2% of the population connected, but it gives us something more specific and solid to work with.

The key now, though, is to make sure that we don't allow Congress and the public to get sticker shock at these estimates. We can't allow people to dismiss the possibility of a Full Fiber Nation out of hand as being prohibitively expensive.

Instead what we need to be doing is showing that while we'll never reach these goals by having government continue to simply write checks, if we're savvier with how we spend taxpayer dollars we can leverage them to reach these seemingly impossible numbers. As a painfully simplistic example, with $10 billion a year in budget authority, government could distribute $100 billion in loans or loan guarantees.

But the other important point we need to be hitting is that if America wants to remain globally competitive, if we all share the goal of our country being an international broadband leader, than these are the kinds of investments we're going to be needing to realize in our broadband infrastructure.

Regardless of if you think there's a clear and present need for 100Mbps and beyond today, that's where the rest of the world is heading, and some countries are already there.

Put another way, if we can't find a way to incentivize hundreds of billions more investment in our country's broadband infrastructure, then we can't and won't be a global leader in broadband. It's that simple.

The Key Word For Our National Broadband Plan: Leverage

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Given the fact that America's financial resources appear as though they'll never be turned full force towards tackling the broadband challenge, it's likely that our national broadband plan will have to be crafty with how it recommends allocating scarce resources to maximize the impact of the dollars we do have to spend. In other words, the plan must leverage whatever money is available as much as possible.

Unfortunately, to date our government hasn't been very good at leveraging taxpayer dollars to create long-term broadband assets that can be built upon and expanded on into the future.

The most recent example of this is the broadband stimulus package, where the bulk of the money was given to NTIA to hand out as grants. The only leverage this approach realizes is the 20% local match. In other words, for every dollar of grant we only get $1.25 of broadband.

In no way am I trying to denigrate grants as I think they're an absolutely essential tool in our broadband toolkit as some projects would only be feasible with a government grant. But what I am saying is that in light of the fact we don't have enough resources to just write the check to bring broadband everywhere, we need to maximize the impact of each dollar, and grants deliver little to no leverage. Therefore I do believe that we should be looking at grants as the exception and not the rule.

Another example of government squandering opportunities to leverage taxpayer dollars to a greater degree is USF. Not only does the program still focus on telephone service over broadband, but it's designed primarily to write checks to companies with legacy networks to help sustain their businesses. While I understand that the economics of rural communications networks can be difficult, especially in very remote areas, it doesn't make a lot of sense to me to continue writing checks that do nothing more than maintain the status quo.

I've had similar thoughts related to e-rate. The fact that those funds can only pay for the monthly broadband service charges and not be used to establish long-term infrastructure that can drastically reduce the operating and maintenance costs of broadband service is yet another example of a missed opportunity to leverage government dollars to do something bigger and better.

What worries me is that if we continue down this path of not leveraging these funds to a much greater degree then there doesn't seem to be any way for the national broadband plan to have any chance at accomplishing big things.

Yet on the flipside, if we make leveraging these funds a core element of every way that we're spending money then this dynamic can change dramatically.

For example, let's consider a very basic attempt at USF reform.

Today USF pulls in a bit over $7 billion a year. Now, instead of writing checks for operating expensives, let's shift that money to a program that prioritizes mechanisms that can leverage these funds to raise the availability of money for capital expenditures, like loans and loan guarantees. By doing this that $7 billion in budget authority can expand to at least $70 billion in loans and/or loan guarantees.

If we circle back to a number the FCC released as an estimate of what it'd cost to wire America with 100Mbps service--$350 billion--you can see how by leveraging the resources we already have coming in to a greater degree we can free up enough capital to accomplish this goal by 2015.

Of course there are a million details to work out in this model, like how existing operators that are dependent on USF can survive and keep offering service until new networks are built, who should get the financial support to build these networks, if the networks need to be open access with multiple service providers, whether it's better to give out money as loans or loan guarantees or something else entirely, etc.

But I think this example captures in a nutshell the opportunity that we have, despite the lack of new money coming from Congress, to shift the needle in a big way if we stop relying on the simplistic method of just writing checks to a model that leverages government dollars to get the biggest bang for the taxpayer buck.

The idea of leverage is also important in terms of encouraging projects that leverage multiple pots of government money as a fully integrated project setup to benefit all facets of a community should qualify for a host of additional funds. Plus we also need to thinking about how to leverage existing assets so that we're not overbuilding capacity if it's not needed.

I know for a fact that there are good people in government trying to think about how to solve these problems in these ways. My hope is that as they go about doing so they keep in mind the key word for every time anyone spend taxpayer dollars: leverage.

UTOPIA Trailblazing New Opportunity For User-Owned Fiber

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An exciting development has occurred recently in the world of fiber deployment. A new model is emerging in Brigham City, a city of less than 20,000 in northern Utah, for how user-owned open fiber networks can be financed and deployed.

It used to be that the only way you could get fiber was if you were lucky enough to have a private provider lay it or to live in a city that did it itself. Today in Brigham City, for $3,000 you can buy your own fiber. And in fact more than 1,600 local residents have already bought in to this new opportunity.

With that fiber they'll get access to UTOPIA's competitive and growing ecosystem of service providers, where they get to choose what services from what providers they want running on their pipe.

While this may sound radically different from how fiber has been traditionally deployed in the US to date, user-owned open fiber networks have already been a big success in Sweden, helping them wire remote mountainous communities with world-class broadband infrastructure.

We also need to realize how potentially brilliant the open fiber concept is for rural America because of how it allows for competition to happen between service providers on a single pipe. With open fiber you can make sure that everyone benefits from having access to a competitive marketplace of communications services.

But I'm even more excited about what UTOPIA's new model could mean for the future of fiber deployment.

The biggest problem with the economics of deploying fiber is that you have to carry a massive debt load and begin paying it off before much revenue starts coming in. Plus you have to invest a lot of money into neighborhoods without any real idea of how many people are going to sign up for service.

The user-owned model totally changes these dynamics. First off, by having users pay for their own pipes you disaggregate most of the debt. Just look at Brigham City. They're building a $5.5 million network and the city's only putting up less than $700,000. So no massive debt load for the city (or a private provider for that matter) to carry.

The second major piece of this is that UTOPIA's going to have built-in take-rates when they build out neighborhoods. Plus churn should fall to zero since people own their pipes.

Basically the way I see this is as the possible beginnings of a new third model for fiber deployment in the US. You no longer have to wait for a private provider to make the investment, or for your city to figure out how it can overcome all the roadblocks and then actually execute effectively. Instead users who want service can band together and find a way to get it now rather than waiting twenty years for someone else to figure out how to do it.

I have to catch myself, though, as the reality of the situation is that this is the first time this has ever been attempted in the US. There are still a lot of questions to be answered and hurdles to overcome.

For example, the current model in Brigham City is that if you don't buy in then you can't get service. So they've completely abandoned the old model, which may prevent some from being willing to take the leap, especially as Brigham City does have Comcast and Qwest offering service in town.

They have developed a special assessment area model, though, that allows homeowners to commit to a $25 a month payment over 20 years to spread out the cost over time.

Another potential trouble spot is how to deal with renters who want service but landlords who don't want to pay to have it installed.

But while there are questions still to be answered, the keys for right now is that this model has worked elsewhere, and now at long last we have someone willing to step out and see if it can work here in the US.

So I say to UTOPIA: best of luck as you continue on these endeavors! The rest of the country is watching, and we're all hoping you succeed as there are millions of us that wish we could get our fiber now but can't.

And to Brigham City: Kudos to you all! We are all cheering you on, inspired by your commitment to getting yourselves wired with the most important infrastructure of the 21st century.

FCC Misses Two Key Barriers For Broadband Adoption

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The FCC just released their top five barriers to broadband adoption. They are:

- The affordability of service
- The affordability of hardware
- Lack of digital and technical literacy
- Lack of awareness of the relevance and utility of broadband
- Inability to use technology and apps due to physical or mental disabilities

While I don't disagree that these are all barriers, I think the FCC has missed two of the biggest barriers to universal broadband adoption.

The first is the question of the value proposition of broadband services. When consumers make decisions about whether or not to buy broadband it's not just the price that matters. They need to feel like they're getting fair value for their money and that they're going to be treated with respect as paying customers.

The former of these points relates to issues of how much bandwidth for how much money and how many restrictions are there on what can be done with that bandwidth. If I'm in an area where it costs a whole lot for not much then unless I really need broadband this is likely to turn me off to the idea of purchasing it. This isn't enough to stop someone from subscribing who has to have it, but it is likely enough to dissuade some of those who are on the fence.

The latter point relates to the undercurrent of resentment that many potential subscribers have to whoever might be providing broadband service in their area. Many of the big cablecos and telcos have poor reputations when it comes to customer service. So if I'm subscribed to cable or telephone service from one or the other, and they haven't treated me well, then I'm going to be disinclined from giving them any more of my money. While again this may not be enough to dissuade someone who really needs broadband, for those on the bubble it could be enough to keep them from signing up, especially since often their choices for who to subscribe to are limited.

Then bridging both of these points are issues like overage charges and bandwidth caps. If I've signed up to pay for broadband at one price, but I unexpectedly get a much larger bill in the mail simply because I used that service too much, then that's likely to dissuade me from wanting to keep that service any longer.

We have to get past the simplistic reading of the cost of broadband as a barrier and realize that also important is the nuance of how customers perceive the value proposition that a broadband service provider is offering them. Because if customers don't think they're getting fair value, that's a large disincentive for them to sign up for service.

The other major barrier that goes unaddressed in the FCC's top five is the need for broadband and the Internet to improve the user experience. Their point about the lack of awareness around the utilty of broadband among those who don't subscribe suggests that the Internet is already a highly useful tool for everyone to be using, that it's already jam-packed with relevant content. Also, the suggestion that digital literacy is a big barrier presumes that all that's needed is additional training to get everyone comfortable with using the Internet as it currently exists.

I would like to argue that we should also be paying attention to fostering innovation around ways to make the Internet easier to use and more relevant to everyone.

Too often I think we get caught up in the assumption that the Internet's already great and that all we need to do is expose people to it and they'll see the light. In reality we still have a long ways to go before we can make this assumption. For example, how many local governments have transitioned all of their systems online? How many healthcare systems are using electronic medical records? How many schools have educational materials online? Sure the number is increasing, but we're a long ways away from anything resembling universality.

Then on a related note, we need to be expecting more out of the usability of broadband and the Internet. I think we're making a mistake if we simply accept the user paradigm of today's computers and Internet apps as the best we can hope for, and focus all our attention on getting users to adapt to the technology. Instead we should be pushing the technology to evolve to meet the needs of consumers, especially in terms of making things easier for the mass market to adopt and use.

The simple truth is that for those not familiar and comfortable with computers, the current paradigm of how to access and gain from the Internet isn't easy or straightforward. First you have to know how to start a computer, then how to open a browser, then how to find anything, then what it means to download content, then to install applications, then we get into plug-ins and extensions, and very quickly you can see how the complexity of all of this is an incredibly high barrier for adoption.

It can be hard to recognize this as a barrier as for those of us already comfortable with computers they seem very easy to use. But if we're talking about how to achieve universal adoption, then we can't limit ourselves to these assumptions and to the idea that what's needed most of all is training when greater gains could potentially be achieved by innovation in user interfaces and how consumers access the Internet.

The clearest example of this to me is the iPhone. The iPhone has made it dead simple to use mobile broadband, whether it be through their robust browser or applications. If we want to achieve universal adoption and use, we're going to need more of these kinds of innovations.

The top five barriers to adoption that the FCC listed are a decent start, but they also only picked the most obvious choices. If we want to truly achieve our goals of 100% adoption and use, then we need to go beyond the easy answers and acknowledge that more nuanced barriers exist, like the value proposition of broadband service and the user interfaces associated with accessing the Internet.

What Will This Congress's Broadband Legacy Be?

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In a cab ride home from the airport today I had a profound moment of clarity regarding broadband policy.

It was inspired by a particularly knowledgeable driver who was able to succinctly sum up the challenge broadband policy faces of whether to treat broadband as we do highways with massive public investment or if we should leave it to private providers but then lose some amount of control over what happens on these networks.

I then suggested that one of the core challenges we face in broadband policy is that while we need to be taking a long-term view of this key infrastructure, for the most part Congress tends to think about the impacts of their policies within a five-year window, too often focusing more on getting reelected than making good policy.

That's when the moment of clarity struck: My driver suggested that what Congressional types need to be doing is thinking more about their legacy than getting reelected. He made the terrific point that some day they won't be in Congress any more, and that the decisions they make in Congress are what will form their legacy and how they're remembered.

I find this notion especially salient in the context of the near-term future of broadband policymaking.

I mean, think about what's slated to happen in the next year: the end of the broadband stimulus, the release and initial implementation of a national broadband plan, the formalization of net neutrality, the reform of USF and possibly E-Rate, the upgrade of government networks and systems, and (hopefully) the optimization of all facets of society around the use of broadband.

There's arguably going to be no more significant year than 2010 in the history of broadband. By this time next year we're going to have a clear sense for what direction our country's broadband future is heading in. We'll know if Congress has decided to take bold action, or continue being satisfied with half steps. Next year is going to set the stage for decades to come.

So the question becomes: what will this Congress's broadband legacy be?

Will they be able to step beyond near-term, self-interested worries about getting reelected, or will they recognize the significance of this opportunity and set out to make policies that take into account the long-term big picture?

Who's going to step up and put the needs of people over politics? Who's going to realize that they can cement their legacy as public servants America can be proud of by becoming broadband champions? Who wants their name to go down in history as the people responsible for setting America on a new course to a better broadband-powered tomorrow?

Ever the optimist, I believe that we do have elected officials in power who can think beyond their own self interests and that respect the weight of history that comes with walking the halls of power. Now I can only hope that they follow these instincts in the coming year to not allow our country's broadband policies to be shortsighted and driven by the desire to get reelected rather than to make America great.

And I also believe that those that do step up to make the case for the need for forward-looking broadband policies will be rewarded in the short-term as well as America's hungry for some real leadership on these issues.

So to Congress, the ball is now in your court. The opportunity to establish a legacy that will last beyond the next election cycle is before you. And America's waiting and watching to see who's willing to put the long-term needs of our country first.

I've been remiss in not keeping you all up to date on the latest excitement coming out of Lafayette, LA. In the last few weeks they've been receiving a lot of national recognition for the many innovative things happening in the heart of Cajun country.

In September Forbes ranked Lafayette as the 8th best city in the country for job growth in the 4th quarter of '09. And then in October Fortune Small Business pegged Lafayette as the second best mid-sized markets in the nation for small business startups. These combine to show that Lafayette's overall economy is strong and growing.

Then, just last week, Lafayette announced an exciting new addition to their local economy: the opening of a permanent studio by Pixel Magic at the LITE Center.

Pixel Magic is a visual effects studio that's done such nationally renown work as the final battle scene in the movie 300. They're going to be creating a dozen jobs there the first year and scale up to forty in the next three.

This is a huge win for the community and likely portends of more good things to come as word gets out about Pixel Magic's decision and other digital media companies get a chance to consider the many advantages that come with opening up shop in Lafayette and at the LITE Center.

The LITE Center has also gained national recognition in a USA Today article about their work with students up at Carencro High School in a program called the FiberKids. (The link to that article is broken for some reason, so here's one to a different article about the FiberKids.)

What's amazing to think is how far the community has come and how much success has already been realized, and yet this is really only just the beginning, scratching the surface of their potential.

I'm a big believer that the sky's the limit for innovation in Lafayette, and I look forward to sharing more of the good news that's sure to be coming out from there in the months ahead.

[Addendum: How could I forget this? LUS has received a $11 million matching grant from the federal government to help support the deployment of smart grid technology in Lafayette. The hits just keep on coming!]

Broadband Adoption Is About Value More Than Price

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Yesterday I had the great fortune to tag along with Gary Evans and his team from Hiawatha Broadband Communications (HBC) as they embarked on a series of meetings in DC to discuss broadband policy.

While lots of interesting issues were touched on, the one that kept drawing my attention was HBC's assertion that while they're not the low price provider in any market they serve, they're the dominant provider in every community they're in.

As a quick frame of reference, HBC is a broadband provider in rural southeastern Minnesota. They operate a legacy HFC network, but their buildout nowadays is focused on fiber-to-the-home, bringing it to rural communities, some of which have less than 1,000 people.

When asked to explain how they've become the dominant provider without having the cheapest services, they cited a number of reasons.

Number one is customer service. An example they gave is that in one small community they serve, the multi-state incumbent only brings their network technician to town on Thursdays. So if your TV broke Thursday night, you had to go without service for a week. HBC, on the other hand, sets up a local customer service agent in every community they serve, and have a stellar reputation for fixing problems within hours rather than days. What they've proven is that customers are willing to pay a bit more if they can get good customer service.

Number two is their commitment to the communities they serve. In addition to hiring local customer service reps, HBC also has TV production capabilities that they use to capture local events, like high school sports. They also go out of their way to find opportunities to donate to worthwhile causes in their communities. In these ways they prove to their customers that they're fully invested in the areas they serve.

The third piece of the puzzle of their value proposition is the quality of the service they deliver. Their networks are more reliable than their competitors on multiple levels: they fix any issues faster, they have fewer issues in the first place because of fiber's fewer moving parts, and they do a better job of actually delivering the bandwidth their customers pay for.

While there's lots of talk nowadays about the importance of focusing on spurring broadband adoption in policy circles, those conversations are often limited to how can you make broadband cheaper and more relevant to users. Though the latter of these is still very important to consider, HBC is proving that the former isn't as big of a deal as some make it out to be.

And the proof's really in the pudding: HBC is realizing takerates in excess of 60% and often even above 70% in the rural markets they serve, which I believe is higher than the national average despite HBC operating in competitive markets.

Why? Because their customers feel respected, feel valued, that their needs are being met by a network operator who cares about each and every individual customer.

One of my great hopes is that all network operators can be inspired by HBC's experiences, to take more time to treat their customers right. As that can only help as we push to overcome the broadband adoption gap in America.

Stop The Madness: The Internet Has To Be Regulated

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I'm officially at my wit's end with the discourse surrounding whether or not the FCC has the authority to regulate how networks are managed, grinding my teeth every time I hear the rallying cry of, "You can't regulate the Internet!"

While there's no denying that the Internet has benefited from a light regulatory touch, to suggest that the Internet can't and shouldn't be regulated is dangerously wrong.

We have to understand that the so-called "digital economy" is simply the next generation of our traditional economy. And just like our traditional economy, there are times when we need government to step in and correct market failures, protect consumers, and generally establish what the rules are for how business should be conducted.

Don't get me wrong: every time Congress decides to regulate a portion of the Internet I cringe as too often these policy debates devolve into sloganeering, which tends to gloss over the nuance necessary to make effective policy. And I'm not a big fan of regulations in general.

But to suggest that the Internet should forever be unregulated misses not only the proper role of government, but also the fact that more and more of our traditional economy is going online, either to be enhanced or replaced by the Internet. What this means is that if we take a totally deregulatory stance towards the Internet, then we're basically applying the same mindset to our entire economy.

While some might see that as a good thing, the other significant challenge we face is adjusting existing regulations in light of how the Internet is shifting paradigms on everything from how we conduct business to how we communicate with each other. Old definitions tied to the traditional economy don't necessarily work any more. And yet if we don't address the digital economy with at least updated regulations, then we're going to be left stuck trying to fit the infinite shapes of the Internet through the square holes of outdated regulations.

Getting back to net neutrality, I can't understand the rationale behind efforts to stop the FCC's rulemaking procedure on preserving an open Internet. Are we really suggesting that we can't/shouldn't regulate network management at all? That no one should have the authority to do this?

I can see why some might say that we're better off waiting for the market to evolve a bit further before enacting a new far-reaching regulatory regime, but to say that the FCC doesn't or shouldn't have the authority to conduct oversight on this highly technical, very important issue seems misguided at best.

Just like the Internet, broadband networks have to be properly regulated if we are to protect the interests of consumers and provider network operators with clear ground rules to guide how they invest in and expand their networks.

I actually am in favor of taking a light regulatory touch at this time and giving the market a bit more runway to sort itself out before going too overboard with new regulations. But to suggest that we shouldn't be addressing these important, complex issues, and/or that it's not the FCC's purview to tackle these challenges is pure madness and has to be stopped.

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