Several years ago, America was a gigabit desert. No American communities had the prospect for the world-leading broadband enjoyed in Korea, Japan, and Sweden. Now, with Google and AT&T negotiating to build such networks in dozens of communities and with others now stepping up, America may soon enjoy a gigabit garden.
But don’t pop the champagne. Many factors could derail the progress. One is a complaint sometimes raised when Google, in particular, starts negotiating with a community. The complaint? The new investment will create a digital divide because Google does not commit to connect every neighborhood. The argument, while sometimes well-intentioned, ignores history, economics, and the reality of the digital divide. Moreover, its proponents fail to acknowledge the consequences of their arguments.
The ignored history is the social contract underlying the telephone and cable networks. For both, government granted a monopoly in exchange for a network build-out requirement.Those companies enjoyed decades of official protection from competition; circumstances that made the economics of the obligation work.
#### Blair Levin
##### About
Blair Levin is an Aspen Institute Fellow and Executive Director of Gig.U, a consortium of research university communities seeking to accelerate the deployment of next generation broadband networks. Formerly he was the Executive Director of the Omnibus Broadband Initiative at the FCC.
Governments did not, however, apply such build-out requirements to new entrants, as that would have killed investments in new competition. Google is a new entrant, with no monopoly advantages.To claim fairness requires a universal build-out ignores the advantages the incumbents had for decades.
In fact, the FCC has found that federal law generally preempts must-build requirements. In a previous proceeding about competitive video entrants, the FCC wrote, “(t)he record contains numerous examples of build-out requirements at the local level that resulted in delayed entry, no entry, or failed entry...We find that build-out requirements imposed by [local franchising authorities] can constitute unreasonable barriers to entry for competitive applicants."
Claiming ‘fairness’ also ignores economics. As we saw with the data from the National Broadband Plan, these networks are staggeringly expensive. Breaking free from the status quo requires both creative and viable economic models. After all, the broadband operators are businesses, not charities. If communities do not work to lower barriers to entry and enable efficient builds, the necessary new investment simply will not happen.
When we started Gig.U, a consortium of three dozen research university communities who came together to accelerate the deployment of next generation broadband networks, Craig Moffitt, a leading Wall Street analyst, said of gigabit networks, “the math won’t work.” He was right--as things stood then. The only reason we have the prospect of a gigabit garden today is because communities, recognizing the positive economic impact of such networks, are willing to change the math.
Generally, this hasn’t involved offering subsidies or incentives, unlike most economic development projects. For instance, Google hasn’t asked for a dime from cities -- instead, they sought efficient, predictable builds by asking cities for a streamlined permitting process and access to existing infrastructure like utility poles.
As we have seen in Gig.U negotiations, must-build requirements make projects unsustainable. Communities can wish for anything they want but if the economics don’t work, it won’t happen. Recently, Los Angeles put out a request for proposal (RFP) seeking a guaranteed citywide fiber build out. Broadband policy expert Harold Feld correctly noted, “I look forward to their RFP for a unicorn supplier, because I think it's about as likely under these terms.”
>Google’s model is fiber-on-demand -- it empowers communities to choose for themselves.
The Gigacritics also ignore the reality of the digital divide and the facts about Google Fiber. We should worry about the digital divide caused by affordability and the lack of digital readiness more than any theoretical divide caused by new fiber options.
Google’s model is fiber-on-demand--it empowers communities to choose for themselves. Google divides a city into ‘fiberhoods,’ (Google’s term for a neighborhood) and then builds wherever a certain percentage of residents sign up. When Google first went through this rally process in Kansas CIty, 90-percent of the Fiberhoods qualified, including 17 of the 20 fiberhoods with the lowest median incomes. What’s more, Google Fiber offers by far the lowest priced option for a wire line broadband service of 5 megabits per second, addressing the critical question of affordability, which remains a barrier to many who could benefit from broadband.
We should welcome the experiment America is effectively running on different methods to address the affordability gap. One is Comcast Essentials, in which the government sanctions a low-price offering, not generally available, for specified low-income families. While critics argue Comcast is not offering charity but rather is engaging in profitable price discrimination, I believe the program has a positive impact. Google has a different approach; a market driven offering available to all that dramatically lowers the price. No one can be certain which will bring more online; we’re best off letting both companies compete.
What about the people who still choose not to use broadband? This gets to the core of problem for digital inclusion--not the lack of affordability, but the lack of digital skills and relevance for too many people. On that front, Google Fiber is a plus. What we have seen in Kansas City is that by making digital inclusion a topic du jour, Google’s fiberhood rallies helped mobilize resources and attention to address the tough issues holding back progress.
>I ask critics to point to one Kansas City resident who is worse off because of Google’s efforts. They can’t.
Moreover, the gigacritics are not being forthright about the implications of their arguments. Whenever I hear that Kansas City erred in allowing Google to build its network, I ask the critics to point to one Kansas City resident who is worse off because of Google’s efforts. They can’t. On the other hand, city officials tell me that all residents benefit, either from the new offerings or the competitive response of incumbent providers upgrading service and lowering prices.
Indeed, new entrants and upgrades drive the whole market forward. Under the current market structure, many are rightly concerned that data caps and some content being shunted off to 'slow lanes' by incumbent providers could diminish the innovative character of the Internet. New entrants offering affordable bandwidth abundance shape market behavior in ways that mitigate such concerns, cause incumbents to step up their game, and raise the tide for all customers and content.
When one argues for a public policy, one should be candid about the consequences. Gigacritics should be asked: what are the consequences of a community adopting their proposed policy? If they are honest, they will admit there are only two potential outcomes. One, the community will be limited to the existing providers. Competitive forces will not drive an upgrade for many years to come and new benefits for both low-income communities and all others will not be realized. Alternatively, the community could provide a public subsidy of the network, such as what Macquarie is offering in Utah. It is financing a universal build-out of a gigabit network but requiring local governments to impose a universal utility fee.
Gigacritics should either admit they prefer the status quo or advocate for direct public investment. Otherwise, we should deposit their arguments in the same bucket as we would a request for unicorns. But in no event should we stop the momentum for the next American upgrade.
