I’m always amused when I read stories quoting high-tech company leaders bemoaning the fact that they supposedly don’t get enough respect from Washington legislators or regulators. The latest example comes from a story in today’s Politico (“D.C. Crowd’s Path to Silicon Valley” by Tony Romm) which begins by noting that, “A trek to Silicon Valley has become a must-do for D.C. lawmakers seeking to stress their business and tech bona fides while developing relationships that could lead to big campaign donations down the road.” And yet it ends with this ironic bit:
Silicon Valley types typically don’t mind hosting lawmakers, as the trips give businesses out West the chance to put issues and needs on the minds of their regulators. But tech bellwethers sometimes don’t take kindly to lawmakers who treat the valley as an endless ATM. “All too often, people see Silicon Valley as the wallet and set aside the words or wisdom that [it] can provide,” said Carl Guardino, president and CEO of the Silicon Valley Leadership Group.
Well, boo-hoo. If Mr. Guardino and his fellow Silicon Valley travelers don’t like being treated like an ATM, then they should stop behaving like one! No one makes them give a dime to any politician. And once you start playing this game, you shouldn’t be surprised by how quickly you’ll become entrenched in the cesspool that is Beltway politics and become less and less focused on actually innovating and serving consumers.
I wish people like this would go back and read “Why Silicon Valley Should Not Normalize Relations with Washington, D.C.
” by Cypress Semiconductor President and CEO T.J. Rodgers. Everything he said 10 years ago has come true. Continue reading →
Many of the installments of our ongoing ”Problems in Public Utility Paradise” series here at the TLF have discussed the multiple municipal wi-fi failures of the past few years. Six or so years ago, there was quixotic euphoria out there regarding the prospects for muni wi-fi in numerous cities across America — which was egged on by a cabal of utopian public policy advocates and wireless networking firms eager for a bite of a government service contract. A veritable ‘if-you-build-it-they-will-come’ mentality motivated the movement as any suggestion that the model didn’t have legs was treated as heresy. Indeed, as I noted here before, when I wrote a white paper back in 2005 entitled “Risky Business: Philadelphia’s Plan for Providing Wi-Fi Service,” and kicked it off with the following question: “Should taxpayers finance government entry into an increasingly competitive, but technologically volatile, business market?,” I received a shocking amount of vitriolic hate mail for such a nerdy subject. But facts are pesky things and the experiment with muni wi-fi has proven to be even worse than many of us predicted back then.
A new piece by Christopher Mims over at MIT’s Technology Review (“Where’s All the Free Wi-Fi We Were Promised?“) notes that “no technology happens in a vacuum, and where the laws of the land abut the laws of nature, physics will carve your best-laid plans into a heap of sundered limbs every time.” He continues, “the failure of municipal WiFi is an object lesson in the dangers of techno-utopianism. It’s a failure of intuition — the sort of mistake we make when we want something to be right.” Too true. Mims was inspired to pen his essay after reading a new paper, “A Postmortem Look at Citywide WiFi“, by Eric M. Fraser, the Executive Director for Research at the Committee on Capital Markets Regulation. “Almost everyone was fooled by the promise of citywide WiFi,” Fraser notes, because of the promise of a “wireless fantasy land” that would almost magically spread cheap broadband to the masses. But, for a variety of reasons — most of which are technical in nature — muni wifi failed. Fraser summarizes as follows: Continue reading →
Two articles of interest in today’s Wall Street Journal with indirect impact on the debate over the future of Internet policy. First, there’s a front-page story (“Facing Budget Gaps, Cities Sell Parking, Airports, Zoo“) documenting how many cities are privatizing various services — including some considered “public utilities” — in order to help balance budgets. The article worries about “fire-sale” prices and the loss of long-term revenue because of the privatizations. But the author correctly notes that the more important rationale for privatization is that, “In many cases, the private takeover of government-controlled industry or services can result in more efficient and profitable operations.” Moreover, any concern about “fire-sale” prices and long-term revenue losses have to be stacked again the massive inefficiencies / costs associated with ongoing government management of resources /networks.
Of course, what’s so ironic about this latest privatization wave is that it comes at a time when some regulatory activists are clamoring for more regulation of the Internet and calling for broadband to be converted into a plain-vanilla public utility. For example, Free Press founder Robert McChesney has argued that “What we want to have in the U.S. and in every society is an Internet that is not private property, but a public utility.” That certainly doesn’t seem wise in light of the track record of past experiments with government-owned or regulated utilities. And the fact that we are talking about something as complex and fast-moving as the Internet and digital networks makes the task even more daunting.
Government mismanagement of complex technology projects was on display in a second article in today’s Journal (“U.S. Reviews Tech Spending.”) Amy Schatz notes that “Obama administration officials are considering overhauling 26 troubled federal technology projects valued at as much as $30 billion as part of a broader effort by White House budget officials to cut spending. Projects on the list are either over budget, haven’t worked as expected or both, say Office of Management and Budget officials.” I’m pleased to hear that the Administration is taking steps to rectify such waste and mismanagement, but let’s not lose sight of the fact that this is the same government that the Free Press folks want to run the Internet. Not smart.
The folks at the Pew Research Center’s Internet & American Life Project came out with another installment of their “Home Broadband” survey yesterday. This one, Home Broadband 2010, finds that “adoption of broadband Internet access slowed dramatically over the last year.” “Most demographic groups experienced flat-to-modest broadband adoption growth over the last year,” it reports, although there was 22% growth in broadband adoption by African-Americans. But the takeaway from the survey that is getting the most attention is the finding that:
By a 53%-41% margin, Americans say they do not believe that the spread of affordable broadband should be a major government priority. Contrary to what some might suspect, non-internet users are less likely than current users to say the government should place a high priority on the spread of high-speed connections.
This has a number of Washington tech policy pundits scratching their heads since it seems to cut against the conventional wisdom. Cecilia Kang of The Washington Post penned a story about this today (“Support for Broadband Loses Speed as Nationwide Growth Slows“) and was kind enough to call me for comment about what might be going on here.
I suggested that there might be a number of reasons that respondents downplayed the importance of government actions to spur broadband diffusion, including that: (1) many folks are quite content with the Internet service they get today; (2) others might get their online fix at work or other places and not feel the need for it at home; and (3) some may not care two bits (excuse the pun) about broadband at all. More generally, I noted that, with all the other issues out there to consider, broadband policy just isn’t that important to most folks in the larger scheme of things. As I told Kang, “Let’s face it, when the average family of four is sitting around the dinner table, to the extent they talk about U.S. politics, broadband is not on the list of topics.” Continue reading →
Beyond the fact that the Federal Communications Commission (FCC) decided to release the executive summary of its long awaited National Broadband Plan via a PDF of a scanned printed copy, there are other reasons to be concerned about the agency’s ability to centrally plan one of the most important, fast-moving sectors of our economy. In this video clip, I discussed some of my general reservations with the idea of a gargantuan government industrial policy for the broadband sector, and in this essay I noted how, from what we’ve see of the plan thus far [Executive Summary], the FCC appears to be engaged in some creative accounting techniques to fund the scheme.
Not everything in The Plan troubles me, however, and I hope to touch on some of the more sensible elements in a future post. But, as I was reading through it, I flagged 5 regulatory hot potatoes in the plan that threaten to derail the entire thing. In this regard, the parallels between the National Broadband Plan and the debate over health care “reform” are really quite striking. Indeed, it appears the Administration has once again settled upon a “go for broke” (potentially quite literally!) strategy. In both cases, they appear hell-bent and trying to do it all in the form of One Big Plan. Now, I won’t lie to you; such everything-plus-the-kitchen-sink public policy gambits make me nervous based simply on the sheer scale of the undertaking. When Washington tries to regulate massive chunks of the economy using bloated bills and bureaucracies inside the Beltway, it troubles me greatly. But even if the sound of Big Government on Steroids doesn’t raise your blood pressure, one would hope that the prospect of political gridlock and litigation hell would force advocates to scale back their ambitions a tad bit. After all, what good is a plan that can never pass or be implemented?
That’s why I was rather surprised to see these 5 regulatory initiatives teed up in the National Broadband Plan:
(1) Return of the Forced Access Regulatory Nightmare? The Plan says the FCC will, “Undertake a comprehensive review of wholesale competition rules to help ensure competition in fixed and mobile broadband services.” As my friend Randy May of the Free State Foundation notes: Continue reading →
Just FYI.. Tomorrow’s “Diane Rehm Show” on NPRs local affiliate station (WAMU 88.5FM) will feature a debate about the Federal Communications Commission’s (FCC) National Broadband Plan, which is due out tomorrow. [Here's the executive summary.] The show airs at 10:00 locally, but you can listen to the show here online, and I’ll repost a link or embedded audio file once it becomes available.
I’ve been invited to be on the show alongside Ben Scott, policy director at Free Press, Dennis Wharton, spokesperson for the National Association of Broadcasters (NAB), and a few other guests who haven’t been announced just yet. (Here are some of my early musings on the plan: 1, 2.)
After working my way through the Executive Summary of the Federal Communications Commission’s (FCC) National Broadband Plan, there are a number of things I find troubling that I will get to in a subsequent post. But here’s the thing about “The Plan” that I found most surprising — even audacious — in its arrogance: The FCC wants us to believe the whole scheme is costless. The agency bases this astonishing claim on the following assumptions:
Given the plan’s goal of freeing 500 megahertz of spectrum, future wireless auctions mean the overall plan will be revenue neutral, if not revenue positive. The vast majority of recommendations do not require new government funding; rather, they seek to drive improvements in the government efficiency, streamline processes and encourage private activity to promote consumer welfare and national priorities. The funding requests relate to public safety, deployment to unserved areas and adoption efforts. If the spectrum auction recommendations are implemented, the plan is likely to offset the potential costs.
Let me translate: “Pay no attention to all the bills we are racking up, because spectrum revenues shall set us free!”
Perhaps that logic works in the reality-free zone we call the Beltway, but back in the real world this simply doesn’t add up. Regardless of how well-intentioned any of these goals and proposals may be, it should be equally clear that there is no free lunch, even with spectrum auction proceeds fueling the high-tech gravy train. The proposals and programs the FCC sets forth will impose serious economic costs that shouldn’t be so casually dismissed, especially using the weak reasoning that “improvements in the government efficiency” will magically manifest themselves thanks to massive new government intervention in the field. (If you think you’ve heard this one before, you have. See: The current health care debate.)
Moreover, if everything really does hang on the promise of spectrum auction revenues covering the broadband spending binge, well, bad news: The agency is never going to bring in enough to cover what they’ve proposed here. The reason is simple: Most of the spectrum they want to grab is currently occupied by someone else! Continue reading →
I somehow missed this excellent ITIF paper by Robert D. Atkinson and George Ou when it came out at this point last year, but George has just dusted it off, made a couple of updates, and re-posted it over at the Digital Society blog. Worth reading. It touches on a lot of the same case studies I have been documenting in my ongoing series, “Problems in Public Utility Paradise.” In particular, it focuses on the UTOPIA and iProvo fiascos out in Utah. Here’s a key takeaway from those case studies:
The lessons learned in Utah is that projected uptake models and deployment plans don’t always come to fruition, and when that happens the consequence is failure. For UTOPIA, the project was projected to reach 35% uptake rates by February 2008 but the reality was less than 17% uptake. UTOPIA had also hoped for 17% uptake from lucrative business customers but the reality was only 2 to 3 percent. Provo County’s iProvo was hoping for 10,000 subscribers by July 2006 with the assumption that 75% of those customers would subscribe to lucrative triple play services, but the reality was 10,000 customers in late 2007 with only 17% of those customers subscribing to triple play. Many consumers were quite happy to subscribe to existing broadband cable or telecom providers. The consistent theme in Utah was an overestimation of the uptake rates and the underestimation of competition from incumbent cable operator Comcast and telecom operator Qwest which led to consistent underperformance.
Ouch. For more details, see this old essay of mine about UTOPIA from 2008, and this piece from last Sept about iProvo. Not a pretty picture. As I say every time I pen a piece about the latest muni failure du jour, these case studies should serve as a cautionary tale about the dangers of grandiose, centrally planned broadband schemes. There is no such thing as a free lunch. Network-building is hard, and politicians usually aren’t that good at doing it.
Today I am attending, and speaking at, a terrific event in downtown DC sponsored by the Catholic University Law School on“Implementing the National Broadband Plan: Perspectives from Government, Industry, and Consumers.” It’s being held at the offices of the law firm of Wiley Rein LLP. Edward Lazarus, Chief of Staff to FCC Chairman Julius Genachowski kicked off the event with a nice keynote address talking about the broad goals of the FCC’s coming National Broadband Plan. Lazarus broke the ice by joking with the crowd — which is heavily made up of communications industry lawyers — that “The FCC is doing everything it can to provide full employment for telecom lawyers. Whatever else we are failing at, we are succeeding at that.” Again, it was a joke, so I don’t want to make too much out of it, but… No, strike that, I do want to talk about that for a minute! Because this is actually a very important question: Exactly how much bureaucracy and deadweight loss to the economy (in the form of more lawyering and lobbying) is going to accompany the National Broadband Plan?
Two years ago, I posted an essay on “Lawyers, Lawsuits and Net Neutrality Regulation,” in which I attempted to highlight the uncomfortable fact that Net neutrality regulation will likely lead to a bureaucratic nightmare at the FCC and a lawyer’s bonanza once the lawsuits start flying in court. Of course, now we have Net neutrality regulations and a National Broadband Plan pending at the FCC, so the potential for bloated bureaucracy will only grow larger. Do you think I am exaggerating? Well, here are some facts to consider from our recent experience in the field of “telecom reform.” In the years following passage of the Telecom Act, entire forests fell because of the thousands of pages of regulatory and judicial interpretations that were handed down trying to figure out what that word meant. In fact, let’s take a quick tally of the paperwork burden the FCC managed to churn out in just three major “competition” rules it issued in an attempt to implement the Telecom Act and define the “cost” of unbundled network elements (“UNEs”):
November was certainly a bad month, public relations-wise, for the Administration’s stimulus program, what with claims that the program had created huge new numbers of jobs debunked. (Who would have guessed that numbers given for Arizona’s 15th congressional district or Minnesota’s 57th district were wrong?) But, as pointed out last week by my collegue Meinan Goto, there may be further trouble ahead. In a report recently released by the GAO, the government watchdog agency warns of possible waste, fraud and abuse in $4.7 billion broadband stimulus grants to be made by NTIA and the Rural Utilities Service.
The risks stem from a variety of sources, including the speed with which the grants are to be made, and the two agencies near-total lack of any experience with grants of this magnitude. The GAO also points out that, in true cart before horse fashion, NTIA and RUS will have to complete its first, and perhaps both, funding rounds before a map showing where broadband is needed is completed, and before the FCC completes its congressionally-mandated plan on to make broadband available.
GAO, of course, isn’t the first to point out this cart-and-horse situation, but that doesn’t make it any less serious. While less headline-grabbing than invented congressional districts, the report is nevertheless worth reading by anyone who thinks $4.7 billion is still real money.