Sharing The American Experience, Recovery Through Broadband Expansion – A report from Penrith and the Border Broadband Conference at Rheged – Part III

Mapping Our Access To The Information Superhighway -Penrith And The Borders Broadband Conference Shows That We Really Can Connect Cumbria’s ‘Final Third’ To The High Speed Lanes – if community engagement is sufficiently enthusiastic.

For Rory Stewart’s Broadband Website with an increasing array of conference related resources Please Click Here
Many, many thanks to our citizen reporter John Popham for filming and mounting his video on Youtube

PART III  SHARING AMERICAN  EXPERIENCE (third in a series written between bouts of Apple Juicing)

The third part of Rory Stewart’s broadband conference at Rheged focused upon American progress in the expansion of broadband for the benefit of all. To read Part I please click here for Part II please click here.

We were next treated to some interesting insights into American broadband expansion by Susan Walthall, who spoke passionately about the benefits of expanding broadband for economic development specifically among small businesses that serve as a powerful driver of the overall economy. Rural America faces similar challenges to our own, according to Susan, and she should know as President Obama appointed her as Acting Chief Counsel For Advocacy and she’s been doing a lot of work on behalf of The US Small Business Administration (SBA) to facilitate growth and development. The SBA was created in 1953 by Congress to serve as an independent agency of the federal government to aid, counsel, assist and protect the interests of small business concerns, to preserve free competitive enterprise and to maintain and strengthen the overall economy of the nation. They recognize that small business is critical to economic recovery and strength, to building a better future, and to strengthening competitiveness in today’s global marketplace. We heard that in 2009 alone her office saved small businesses $7 billion by slashing regulatory costs. President Obama considers the expansion of broadband services to be crucially important in stimulating the economy, by passing the American Investment and Recovery Act in February 2009 he apportioned “unprecedented” sums of money ($7.2 billion) through the Department of Agriculture and Department of Commerce to fund a host of policies and programs that serve that aim.

Susan emphasized the importance of expanding broadband in economic development and job creation particularly through the empowerment of small businesses (SMEs) as they are a key driver of the economy. Susan presented us with a stream of interesting statistics to confirm our understanding: recent studies in America show that SMEs comprise 99.7% of all businesses and employ just over half the private sector workforce, 64% of net new job creation over the past 15 years is attributable to SMEs, they’re responsible for just over half the non-farm Gross Domestic Product, they produced 13 times more patents per employee than large firms and comprise 97.3% of all exporters. They represent American entrepreneurship, hence the importance of enabling better leverage of their innovation and productivity through high performance internet connection to better access local, regional and global markets. She stressed that this is a transformative technology.

The challenges in the United States include ensuring small telecoms can compete with the giants to reduce prices and expand services, often the current regulatory regime presents difficulties to small carriers who face increased rates to access broadband lines, these barriers to entry are reflected in higher prices due to lack of competition. Her office is attempting to reduce barriers to entry and to open up access to spectrum. They have urged The Federal Communications Commission to allow small businesses that qualify for bidding credit to participate in auctions for spectrum. This would effectively allow small Telecoms to provide services in many areas that are not properly served by the big Telecoms.

The Department of Agriculture have been granted $2.5 billion to disperse in loans and grants to expand broadband infrastructure in rural areas through the Broadband Initiatives Program (BIP) and the Department of Commerce have been allocated $4.7 billion for grants and loans to expand public infrastructure in the form of public computer centres and sustainable broadband adoption centres in a program called Broadband Opportunities Program (BOP)

In August, Vice President Biden and other officials announced that Recovery Act programs help small businesses to play on a level playing field, bring down the cost of private investments, attract Internet Service Providers to new areas and improve digital literacy, thus helping to create new opportunities in employment by attracting new businesses, in education by enabling distance learning, in medicine by providing remote care, in entrepreneurship by allowing businesses to scan for new markets and opportunities for developing new products.

Two other elements of note in the recovery Act are: 1) The Mandate for a National Broadband Map, expected to be ready in Spring 2011 to show broadband availability and enable more data driven decision making, and 2) The Mandate for a National Broadband Plan which will lay out a strategy to ensure access to affordable broadband.

To well-earned applause Susan then handed over the podium to Mr. Erik Garr to allow him to talk in more detail about the National Broadband Plan. Erik is Partner at Diamond Management and Technology Consultants and was formerly General Manager of the National Broadband Plan for the Federal Communications Commission. He began by explaining why they set out to write the 367 page plan. He reiterated the similarities that exist between the American and British communications contexts – regulatory conditions and the understanding that on the whole, industry is the appropriate mechanism to deliver broadband. He explained that in the US the government sets the process in motion and establishes the motivation for both the large Telecom corporations and the small businesses that Susan was talking about earlier. He then broadly sketched the American situation with major centres of population on the east and west coasts and heavy industry concentrated around Chicago these populations served by large companies like Verizon and AT&T, with huge expanses of less populated territory in the mid-west sometimes described as ‘the great fly-over’. He added that in the States cable TV companies are major purveyors of broadband services also covering about 85% of the country. Increasingly customers are being offered the option of fibre-to-the-home (FFTH), Verizon has been investing a lot on FFTH, particularly in wealthy, densely populated areas as this makes good business sense, but it is necessary to fill in the gaps to provide universal service – such places as rural Michigan (the American Lake District) also need to be connected.

Their National Broadband Plan has three parts. The first and by far the largest part is provided by private industry, that invests about $40 billion per year into communications infrastructure. The Government regulates this private industry, but doesn’t wish to impede that process of investment. The first part of the plan is to make sure that private industry investment is optimised. There are a series of policy recommendations designed to foster more competition and to drive more investment by the large Telcos.

The first and most important lever is spectrum policy. An improved spectrum policy will encourage better mobile networks which will provide stiff competition for all the ADSL networks that the Government would like to see upgraded. They’d like to see widespread G4 mobile technology providing 2-5 Mbps so that the owners of the ADSL lines are prompted to consider either switching to mobile provision or upgrading their ADSL service.

The second major area of influence lies within opening up ‘rights of way’ , the use of ducts and poles. The challenge is to harmonise regulations concerning rights of way so that investors can have reasonably accurate expectations regarding accessibility, cost and particularly the timing. Investors don’t like getting caught up in protracted regulatory processes.

The third area of influence concerns research and development. A lot of the ‘widgets’ that make broadband work were developed through government funded research in America and here in the UK during the 70’s. It’s important to continue backing fundamental scientific advances that will underpin the products and services of the future. The refinements and applications of those advances will be left to the industry.

The second part of the plan concerns connecting the 14 million or so households that don’t fit into the profitable business models of the large Telcos. There are three strategies to remedy this shortfall. In about a third of cases where the distances from the nearest provider to the homes in question aren’t great then a grant of sufficient size to make the connection commercially viable can be provided to motivate the providers into connecting the homes. Another third of homes are just too remote for a one off payment to be sufficient incentive to the providers. In this case the Universal Service Obligation that covers telephone lines can be extended to cover broadband access as well. The couple of dollars that is added to every phone bill in the States to provide that extra money necessary to connect those really out of the way places can also serve to provide the regular payments necessary to connect them with broadband too. The one third of the population who don’t get broadband yet, either through choice, for financial reasons or due to digital illiteracy need to be offered the option – if its deliberate choice that’s fine, but if it’s for the other two reasons, then the situation needs to be rectified appropriately with funding strategy or IT education so that the opportunity is there for them.

The third part of the plan focuses on applications, Erik’s favourite part of the plan. While a lot of attention has been given to the establishment of the networks, far less, so far, has been devoted to developing the applications and specifically the profitability of the applications that would make connecting to broadband worthwhile. Erik asks “What is the economic value to the country?” His answer is very interesting. When they surveyed all the different application sets they noticed some parts of the economy where the private sector hasn’t innovated very well, often this is in instances where the government has been a large buyer – in education the software isn’t as good as it could be, in health care the complex way of paying for things hasn’t helped innovation in medical applications, in public safety matters, for instance the First responders could clearly benefit benefit from broadband applications, but very few cities on their own have the resources to create their own networks. The third part of the plan “is really about repurposing existing government dollars to try and solve some of these application problems”. Erik makes a poignant example of a ten year-old education funding program that no longer provides optimal value that will be reworked this week (at time of writing) to enable it to instead pay for ‘capital equipment’ in this case installation of optical fibre that will have lasting and continuous relevance to the students’ education. This is a major change in how the US pays for broadband – it’s a good way of reaching some people from those 14 million homes. In the ensuing Q&A session Erik talked also of the continued importance of keeping the internet ‘free’ in the sense of the original spirit with which it was founded – i.e. people freely exchanging information, and our use of it not being curbed by limits imposed by powerful interests.

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