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10/28/2011
10:14 AM
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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 jf@feldman.org or at @_jfeldman.

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NJ Mike
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NJ Mike,
User Rank: Strategist
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.
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: Strategist
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).
NJ Mike
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NJ Mike,
User Rank: Strategist
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.
TreeInMyCube
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TreeInMyCube,
User Rank: Apprentice
11/2/2011 | 2:58:57 PM
re: FCC's Broadband Plan: What Would Steve Jobs Think?
OldUberGoober's comment reflects a sentiment that underlies a lot of this discussion -- what is the proper role of government in this area of infrastructure? What is the role of for-profit companies? I see analogies to the interstate highway system, vs. state-owned toll roads, vs. local-maintained 4-lane roads. Are the various municipal transit authorities ( PA of NY and NJ, BART, MARTA, CTA as examples) part of the government, or private? It's a really murky situation. OUG, do you find the notion of federal income taxes unconstitutional as well? I thought that the Supreme Court had ruled on that idea, but I might be misremembering.

Part of the justification Eisenhower used for the federal role in the interstate highway system was national defense/security -- being able to move troops and tanks efficiently. That reason doesn't apply to nationwide broadband, but using taxes to promote a national infrastructure for learning and commerce is not so far removed from what the federal government is already doing in those areas.
UberGoober
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UberGoober,
User Rank: Strategist
10/31/2011 | 8:19:56 PM
re: FCC's Broadband Plan: What Would Steve Jobs Think?
Looking at my Constitution I don't find the clause that allows the government to take money from me to build Internet connectivity for people who choose to live in a location where it is cost-prohibitive. And before you start whining about the REA, remember that that was a New Deal program instituted by a president who didn't let a little thing like the Constitution stand in his way.

If you want to run fiber out to the furthest user who wants it, get your state government to do it. They can, since "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." And if a million bucks worth of fiber generates $25 a month in revenue, well, your state's taxpayers can just subsidize it.

We can't afford to do everything for everyone. That way lies Greece...
lsatenstein
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lsatenstein,
User Rank: Apprentice
10/29/2011 | 11:06:26 PM
re: FCC's Broadband Plan: What Would Steve Jobs Think?
Therefore the rural guys should stop paying a large share of Income tax, because they do not use the bridges and highways that take you to and from work.
lsatenstein
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lsatenstein,
User Rank: Apprentice
10/29/2011 | 11:05:36 PM
re: FCC's Broadband Plan: What Would Steve Jobs Think?
Broadband or fibre is the way to go. Then at least with VOIP the rural folks would have telephone, and the web.

Great idea
Rubberman
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Rubberman,
User Rank: Apprentice
10/29/2011 | 6:00:12 PM
re: FCC's Broadband Plan: What Would Steve Jobs Think?
We should be building out the entire country to 100mbps (or higher) ubiquitous broadband, assign everyone who wants it a personal phone # that can follow them everywhere on that broadband network. Until we get the system to that point, we are seriously throttling the potential for economic growth in this country. When I am at home, and turn off my cell phone, calls to my mobile number should be automatically re-routed to my home phone. If someone calls my home phone and I am on the road, the calls should be automatically re-routed to my mobile phone. Yes, with a considerable of futzing about (that I am likely to forget to do when I'm in a rush) I can do most of that now w/ call-forwarding etc, but it isn't the same, and additional charges accrue.

And on it goes. Personally, I'd like to live in a nice house in the country with a big garden and some woods to bird-watch in. I'm an IT consultant, so a lot of my work is from my home office. Unfortunately, current connectivity options when not in town (and sometimes not even then) are limited and expensive. Things need to change, and the major carriers are not allowing necessary changes in our communication infrastructure to occur, instead protecting their legacy income streams. Because they have a choke-hold on our current communication infrastructure and the cost to enter and compete in the market are so prohibitive for new players, this is not likely to change until they are required to.
ajones320
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ajones320,
User Rank: Apprentice
10/29/2011 | 1:07:41 PM
re: FCC's Broadband Plan: What Would Steve Jobs Think?
I find it troublesome that phone (landline only I guess, not mobile?) and broadband users have to pay up so that big telcos with outlandish revenues can build infrastructure to be put into a position to rake in even more money. I am all for getting rural areas connected to the information superhighway, but the funding needs to come from those who will make money on it in the end. They will be the only ones who can recoup their investments. And those would be the telcos, but also companies that will gain a lot from farm sourcing. The government needs to stop enabling those companies who already make tons of money to make more tons of money and have the average Joe pay for making it happen.
As for the FCC plan, they should mandate that the networks built are top of the line, not something that is just a wee bit faster than dial-up.
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