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10/28/2011
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FCC's Broadband Plan: What Would Steve Jobs Think?

Would you spend $4.5 billion to put a 486 PC in every farmer's barn? That's basically what the FCC is proposing to do, and the lack of consideration of new models of telecom is troubling.

FCC chairman Julius Genachowski hailed the commission's latest plan for rural broadband as "taking a system designed for the Alexander Graham Bell era of rotary telephones and modernizing it for the era of Steve Jobs and the Internet future he imagined." It's easy to capitalize on someone's reputation once they're no longer around to object. But would Steve Jobs, famous for bucking the big mobile carriers' modus operandi, brand a plan that is largely supported by big telecom and features old technologies as a think different moment?

The big news is that the FCC is dissolving the Universal Service Fund, created by the charge on your phone bill that subsidizes phone service in rural areas, in favor of creating a fund that subsidizes broadband. "As part of this reform, some consumers may pay, on average, an additional 10 to 15 cents a month on their bills; but for every dollar in cost, reform will provide $3 in benefits for consumers." Wow, does this sound like "Hi, we're from the government, we're here to help," or what?

There's no doubt that any move away from telecom-based infrastructure and towards modern IP-based infrastructure is a good move. But will the FCC's new plan cost you? More to the point, will it preserve the "big brother" status of incumbent telecoms, or is it really a bold, new move, the equivalent of Steve Jobs' runner throwing the hammer into the screen in the famous "1984" Macintosh commercial?

According to FCC commissioner Michael J. Copps, history is being made because, in addition to converting the USF into a broadband subsidy fund, this plan has the FCC transitioning away from inter-carrier compensation. "This item puts the brakes on the arbitrage and gamesmanship that have plagued inter-carrier compensation for years and that have diverted private capital away from real investment in real networks."

Yes, we get it, the system was broken. And the principles behind the new regulation are laudable--but it's still focused on voice service and doesn't recognize that voice can come from anywhere if you have good broadband. The FCC's principles, in summary, are to preserve voice service, ensure availability of broadband and voice service for homes, business, and "anchor institutions," ensure availability of advanced mobile broadband and voice to ensure that rates for broadband and voice are comparable nationwide, and to minimize the universal service contribution on your bill.

My overall take, however, is that it's not really a Steve Jobs moment when we're encouraging carriers to build a whopping 4 Mbps downstream and 1 Mbps upstream. Can I get a Pentium Pro PC with a 100-MB hard drive to go with that? Oh, wait, carriers can apply for a waiver if it's a hardship to build out 1 Mbps. Maybe that comes with a 486SX with 4 MB of RAM.

It's hard to reconcile this with Genchowski's statement that "These networks must meet performance criteria that enable the use of common applications such as distance learning, remote health monitoring, VoIP, two-way high quality video conferencing ..." and so on.

I also think that subsidies usually have unintentional consequences, and that there are other ways to encourage broadband deployment other than paying the usual suspects to do it. But to be fair, I asked several broadband watchdogs and analysts what they thought.

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James H. Cawley, a commissioner with the Pennsylvania Public Utility Commission, thinks that the FCC is vastly expanding its jurisdiction in a way that "allows it to abrogate state laws and usurp established state authority." He says that the FCC's inter-carrier compensation scheme "only works when costs and traffic are roughly in balance (which they rarely are)." As for rural America, and the much-celebrated farmer that Genachowski referred to in his remarks? Cawley says that this scheme "virtually ensures second class status for rural America." Whoa, don't hold back, tell us how you really feel.

Dave Burstein, an industry analyst, is also full of sunshine about the plan, saying that the FCC "gave the big telcos a fat subsidy for what they already have while cutting the small telcos and rural competitors. It's mostly a switch in subsidies between carriers disguised as a broadband effort." It is troubling that, according to his analysis, "Verizon and AT&T claimed they would have to abandon 5-10 million lines that already get broadband because the costs were too high," due to a phony model that claimed $80 per month in costs to serve those lines. He adds that 2 million to 5 million homes will not be reached by this effort, as they're deemed too expensive.

Craig Settles, a broadband consultant who works with municipalities and economic development professionals, agrees that 4 Mbps down and 1 Mbps upstream isn't enough. His research data regarding broadband and economic development backs his claim up. "More than 90% of economic development professionals nationwide believe this speed is insufficient for producing economic impacts such as attracting new businesses to an area, increasing start-ups and increasing individuals' ability to improve their financial situation." He is a fan of the FCC's "demand accountability" part of the plan, but worries that there isn't a defined arbitrator to ensure that these standards are met. While he's got skin in the game, he also points out that the plan doesn't seem to include community or municipal networks. This is strange because there are rural models of success that offer wireless speeds in the 20 Mbps to 30 Mbps range.

As with all plans, the proof of the pudding will be in the execution, not in the press releases or the implementation plan. Many eyes are on the FCC, and the question is, will the implementation actually work, will the money go to anyone but the big telecoms, and will the level of tech be obsolete before it's complete?

Jonathan Feldman is a contributing editor for InformationWeek and director of IT services for a rapidly growing city in North Carolina. Write to him at [email protected] or at @_jfeldman.

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NJ Mike
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NJ Mike,
User Rank: Moderator
11/2/2011 | 5:25:59 PM
re: FCC's Broadband Plan: What Would Steve Jobs Think?
First of all, I lived in Montana for 7 years, so I do have some idea what conditions are like in other areas. (You are obviously ignorant about my backround and experience). Yes, I like to eat, and I pay for food to be transported from those rural areas (that is included in the price I pay). By living in a populated area, I have to put up with the overcrowding those rural subscribers don't have to. My daily commute to work involves more traffic then I ever dealt with in Montana. So I pay a price for the proximity of these services. No matter where you live, there are advantages and disadvantages, some monetary, some of convenience, and you can get in a big never ending cycle when groups have to start compensating each other for the disadvantages they all have.

In New Jersey, because of the demand for housing here, I pay a lot more for it here than I did in Montana, and I get a lot less. That is the cost of living here. You are obviously ignorant of that too.

Bottom line, you are ignorant that life is a series of tradeoffs, deal with it.
NJ Mike
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NJ Mike,
User Rank: Moderator
11/2/2011 | 5:29:12 PM
re: FCC's Broadband Plan: What Would Steve Jobs Think?
Actually, I agree. Why do we send our money to Washington, for them to send it back to us (and they always send less back, they have processing fees).
UberGoober
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UberGoober,
User Rank: Strategist
11/2/2011 | 5:32:01 PM
re: FCC's Broadband Plan: What Would Steve Jobs Think?
Income tax WAS unconstitutional until 1913, but there's an amendment for that (16th). And yes, the Interstate System was originally called the National Defense Highway System, and there were plans for fallout shelters in bridge and overpass abutments; that led to a very good argument for its constitutionality. Those reasons are long gone, and it would be a hard thing to justify constitutionally today. The 'living Constitution' theory has given the government the right to do things that were never envisioned by the Founders; they intended the amendment process to handle changes. Emanations and penumbras and other legal fantasies lead to a scenario where the Constitution means anything you want, and then it has no meaning at all, and we lose its protections.

You will also note that there's not a big outcry to run Interstate highways to the front door of everyone who chooses to live in deepest rural North Dakota. State and county roads, and sometimes really long driveways or even personal airstrips, take care of those folks. With the road analogy, you could make a better case for the Feds building an Internet backbone than driving connectivity to the end users; after all, Interstates are limited access highways.
NJ Mike
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NJ Mike,
User Rank: Moderator
11/2/2011 | 5:37:13 PM
re: FCC's Broadband Plan: What Would Steve Jobs Think?
One of the questions OUG is asking is if this is a proper role for the federal, as opposed to state/local, government. The transit authorities you mention are state/local entities, so only people in that area are paying for them.
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