Broadband Mapping, Connectivity, the Five Freedoms, and Prosperity

A Conversation With Sara Wedeman About the 
Route from 'Here' to 'There'?

Broadband Mapping p. 1

I have delayed publication of the July issue in order to present two interviews. The first, with Sara Wedeman, was done on June 4. We both have labored mightily to include it before final policy decisions are made in Washington, DC. This interview was inspired by April’s discussions relating to the efforts of Connected Communities, Inc., and Rachelle Chong. Having submitted a series of analyses to NTIA during the “public comments” phase of the development process, Sara has a lot to say about how mapping should be done, and why it is so important to do it well.

The interview focuses on three essential themes:

How to, and how not to do broadband mapping;

Methods for making the mapping process a substantive and meaningful part of the NTIA-BTOP program; and

The connection between connectivity, civil liberties, and prosperity.

We begin by discussing research and mapping. These are astoundingly complex exercises, that should not be undertaken without the development of a sound methodology. Using population density as a case in point, Sara focuses on two examples.

In the first we examine an urban zip code, Philadelphia’s 19104.  In this case, using the wrong unit of geographic measurement (the zip code), distorts our understanding of just about everything. Zip codes were designed to facilitate mail delivery, not the measurement of complex, technical issues like ‘lumpy’ adoption and exclusivity of access. If we fail to consider population density (which we will do if we assess urban broadband access at the zip code level), we risk making sweeping and just plain wrong assumptions about who has access to broadband and who does not.

Next and by way of contrast, we cover a rural example, deconstructing West Virginia’s first congressional district. This district includes 20 counties spanning the northern part of the state and abutting Ohio, Pennsylvania, and Maryland. Starting at the state level, the first district appears to be the most densely populated of the state’s three congressional districts. However, ‘smoothing’ the data at this level obscures the fact that most of the district’s seemingly denser population is located in just two census tracts in the city of Wheeling. Wheeling is located at the confluence of the Ohio River and several tributaries, which raised some interesting observations about the interconnected nature of topography, communication pathways, and trade routes.

The important point is that unless one knows how to do this type of research, there is a large danger that the above-referenced issues will be overlooked, resulting in a misleading portrayal of the true state of connectivity in areas both urban and rural.

But broadband mapping is not just about geography. More importantly, it is about people living in geographic space. We cannot conduct a credible mapping exercise without talking to people; asking them about their perceptions and experiences of high speed Internet access. This methodological requirement demonstrates why a few short questions on these topics should be included in the upcoming Decennial Census.

If done well, broadband mapping will be a tremendously sound investment. Its contributions will not stop with locating unserved and under-served communities and creating a national map. It will also help in diagnosing, and presumably redressing, the many causes of service blockage -- which are likely to vary based on both social and geographic factors. Moreover, mapping has the potential to help infrastructure providers develop build-out strategies that literally reflect the ‘lay of the land.’

The next thread of the conversation focuses on the relationship between connectivity, the Five Freedoms, and prosperity. The impetus behind our mapping exercise resonates strongly with the work of Amartya Sen, 1998 Nobel Laureate in Economics. Sen won the Nobel for exposing the explicit connection between the availability of accurate, timely information and the availability of food (or lack thereof) by analyzing conditions surrounding a series of famines in Bangladesh. His later work showed that the protection of civil liberties, the ability to participate in the timely, unfettered, exchange of information and opinion, as well as transparency on the part of society’s institutions (along with two other freedoms) were critical to the health and wealth of nations. These, he called the “Five Freedoms.”

On a macro scale, connectivity, trade, and prosperity are deeply and closely related to one another. Although Sen did not refer specifically to the Internet, it seems clear that the Internet offers an unprecedentedly speedy, open vehicle for exchange of the type that Sen describes – that is, as long as it is ubiquitously accessible and free from the control of society’s most powerful institutions. Consider his words: “it lies in the obligation of States to guarantee or promote a climate of open and plural public debate, and to correct a situation in which these characteristics are absent or distorted.”

This, of course, brings us back to broadband mapping, connectivity, and trade. Waterways - particularly points of confluence between several waterways - were the original highways, communication pathways, and nodes on networks of trade routes. River valleys, protected by topography and vegetation, were and are naturally-occurring shipping channels, outstanding conduits for the free and unfettered flow of information, and homes to markets where one could buy and sell goods and services. That is why so many major cities were formed on their banks.

To the extent that the nation chooses a high quality, granular, multi-modal approach to broadband mapping, this exercise will provide us with value that far exceeds its original cost. When combined and properly analyzed, data collected during the mapping process will help us identify patterns and points of leverage, both geographic and social. This knowledge will, in turn, be vital to crafting effective strategies for infrastructure installation and technology adoption -- goals that embody very spirit and intent of the Obama Administration’s Stimulus Package.

Lessons for the New FCC: How Bush Telecom Policy Installed Duopoly

Why Divestiture 2.0 Could Benefit  Everyone Except for the Executives of the Incumbents

p. 22

Fred Goldstein explains how the Bush led FCC gave the US some of the worst broadband infrastructure in the world by using Chicago School market fundamentalism to create a procrustean bed of so-called competition by which reality was made to fit into presumed assumptions.  Fred finds that the Powell and then Martin FCC concluded that that because competition is legally authorized, it must exist.

He points out that in telecom what you must do is decide where the possibility of competition is realistic. Where it is not, you regulate. But if it doesn’t really need regulation, don’t regulate it.  To answer that question, you have to look very carefully at markets and market conditions at any point in time in order to define where regulation is needed.

We adds that when you think about regulation, you must recognize where the natural monopoly is. The network elements (or physical layers) are the natural monopolies. Services are what you do with your network elements.

You must look at each layer and its elements and decide how competitive they are. At the bottom of the natural monopoly layer are the poles, the ducts and the wire, the dark fiber, and the central office building. With later one you are talking about a natural monopoly. It means that you have no real possibility of entry here because the cost is too high. You have a duopoly rather than a monopoly because the cable companies entered at the same time with a different technology in making their basic layer one network build.

They christened this new regime as facilities-based competition and basically said if you want to compete with the newly entrenched facility as an Internet services provider you had to own the wire on which your services ran.

Fred finds that: Now if you happen to be AT&T or Verizon this was very nice because, of course, they were your classically integrated vertical monopolies.

Kevin Martin tried to ignore the telecom act and re-structure of the industry around to the way it existed in the 1970.

Computer II made the internet possible until the Bush FCC overturned Computer II.

Computer II divided the phone companies into what we would now call functional separation.   Under computer II, the telco provides under tariff so-called basic services.  But the telco may also provide unregulated enhanced services.

COOK Report:  Basic services would be dial tone?

Goldstein:  Dial tone, but also leased line services.  In short what many of us now call bitstream services.   Basic services could go up the stack as high as X.25 and frame relay. It could not go as high as IP.   And that is to say in concrete terms of the protocols available in that era.   In order to operate in the enhanced services space, the telcos had to do so through a fully separate subsidiary.  Such a subsidiary had to be treated the same as a competing corporation. It had to have separate people -- in other words its own employees.  It had to treat the subsidiary the same as it would a competitor. The subsidiary would have to have separate facilities, separate buildings, separate sales force and separate technicians.

Fred finds that the FCC ran a The three front war against ISPs

Front number one was to attack the CLECs who provided most of the dial-up and this was back when dial-up still mattered.

The second front in the war against ISP’s was to reduce the availability of unbundled network elements.

The third and final front in the war against ISPs was to take away the common carrier obligations of the ILECs.

He asks Is restoration of competition possible?

Without rewriting any laws the new FCC could could restore Computer II and III.  It could also  restore common carriage for DSL and other ILEC “broadband.”

Now if they restored common carriage for DSL, they would instantly fix Net Neutrality without having to regulate the Internet.

The long term solution is structural separation into two fully separate corporations.   Call one a LoopCo and the other a ServiceCo or a facilities entity and a services entity.  This would be Divestiture 2.0, in other words, full  fledged divestiture.

It would own the polls, the ducts, the wires, and the  central office buildings.   They would be under rate-of-return utility-based regulation. The lit fiber and bulk transmission would be competitive in some cases but the LoopCo would be a provider of last resort when lit fiber and broadband transmission could not be obtained in any other way.

The top layer of the content layer would be entirely com-petitive. Telephone, the former ILEC ServiceCo, and the CLEC would be essentially the same kind of company. Multiple ISPs would all have access.   Many providers and little regulation.  We have no need to talk about the neutrality of an ISP in this case because they are a publisher.  They are not a postal carrier.   We want for there to be many.

Financial Implications

Both structural and functional separation are good for stockholders.  With structural separation you get more specialized stocks. The LoopCo is a stable company. It is a boring utility that can have a higher debt to equity ratio.
It could absorb some of the debt that companies like Qwest are drowning in.  The  ServiceCo is more risk oriented and therefore that could be the company doing the newfangled stuff and the ISP kinds of innovative services. You can make the argument higher risk should yield higher reward.


Broadband Mapping, Connectivity, the Five Freedoms and Prosperity

A Conversation With Sara Wedeman About the  Route from ‘Here’ to ‘There’

Editor’s Introduction                                        p. 1

To Begin With: Why Are We Mapping?                        p. 3

Mapping is About People Located Within Geographic Space          p. 4

Zeroing in on 19104                                        p. 9

Access to Broadband is Access to Economic Opportunity              p. 12

Lessons from Rural West Virginia                            p. 13

Connecting Physical to Electronic Trade Routes                  p. 16

Issues of Unserved  and Underserved Populations                p. 17

Lessons for the New FCC: How Bush Telecom Policy Installed Duopoly

Why Divestiture 2.0 Could Benefit  Everyone Except for the Executives of the Incumbents              p. 22

Under what Conditions Is Regulation Appropriate?                p. 24

Recognize Where Natural Monopoly Exists                        p. 25

The Fiction of Facilities Based Competition                          p. 26

Why Computer II in 1983 Made the Internet Possible                  p. 29

Revocation of Computer II – FCC Moves Against the Internet        p. 30

Brand X not Related to Computer II --

The FCC Three Front War on ISPs                               p. 31

AT&T U-verse – a Late Life Kicker and FiOS Closed FTTH              p. 34

Part 2 - - Is Restoration of Competition Possible?        p. 36

Why Investors Might Prefer Separation to FCC Action                p. 39

Structural Separation or Divestiture 2.0                        p. 39

The On Going Relationship of ServiceCos and LoopCos              p. 41

Financial Implications                                       p. 42

What Happens to the MSOs?                                    p. 43

Universal Service Clean Up                                     p. 44

Executive Summary                                         p. 47