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Re: Broadband competition: Is this as good as it gets?
From: David Farber <dave () farber net>
Date: Tue, 26 Aug 2008 18:54:44 -0400
Begin forwarded message: From: "David P. Reed" <dpreed () reed com> Date: August 26, 2008 6:34:37 PM EDT To: dave () farber net Cc: Brett Glass <brett () lariat net>Subject: Re: [IP] Re: Broadband competition: Is this as good as it gets?
Perhaps it is news that I agree with Brett 100% on this analysis. Even if it is not news, let me second this. The technical problems of providing really, really good Internet connectivity are not (as they say) "rocket science".
And since the Internet was created to enable incremental innovation "by parts"rather than requiring an institution of the kind of the monopoly AT&T (pre-Carterfone), one can also understand that it is the reason the Internet succeeded.
David Farber wrote:
Begin forwarded message: From: Brett Glass <brett () lariat net> Date: August 26, 2008 1:45:31 PM EDT To: dave () farber net, "ip" <ip () v2 listbox com> Subject: Re: [IP] Broadband competition: Is this as good as it gets?Competition in the broadband space is currently about as good as it's going to get for the foreseeable future, and could even backslide, according to Blair Levin, an analyst with Stifel Nicolaus. "Prospects for the long-heralded 'third pipe' appear dim and dimming," Levin said, referring to the notion of a hypothetical major competitor to both telco and cable companies. "In terms of wireless and broadbandbuildouts, there's unlikely to be another new national buildout, otherthan Clearwire, in the foreseeable future," Levin said.The problem with this statement is that it assumes -- fallaciously -- that a "third pipe" must be created by a national buildout by a single company.In fact, as my customers remind me nearly daily, consumers prefer theirthird option to be not another faceless, nationwide corporation but rather a local provider. One that provides personal service. One thatanswers the phone instead of sending calls to India or the Philippines.One that can make house calls. One that can provide general computer support. In short, consumers already have KMart and a Wal-Mart in theform of the cable and telephone companies. What they need is not another"big box" but rather a specialty store. One whose primary business isbroadband, not video or telephony. One that isn't going to be Big Brotherbut rather a reliable, ethical, friendly local merchant. A local third pipe solves many of the problems that would be inherent in the creation of a large, nationwide provider. Firstly, there's the matter of capital. While stock markets are unlikely to lend muchsupport to a "third pipe," small businesses control, collectively, more capital than the market caps of all public companies combined. If 10,000 small broadband providers each build a business worth $1.5 million, that's$15 billion of capital invested in the deployment of new broadband.Secondly, there's the matter of innovation. While large companies commit to technologies and business models and are loathe to change them, small businesses are much more nimble. They'll develop new technologies and beearly adopters of those developed by others. And thirdly, there's thematter of serving areas with uncertain ROI. Small providers -- far more than big ones -- have a track record of covering sparsely populated areas and of being willing to accept a smaller ROI, or a longer payback period,when doing so. While subsidies for rural broadband can and should beprovided, the notion of expanding the USF -- already a highly dysfunctional program -- to cover them is ludicrous. Instead, subsidies in the form of direct grants to consumers -- perhaps via vouchers given directly to the customers, who could give them to the provider in lieu of cash -- wouldallow providers to compete without burying them in mountains of undue paperwork.While there are approximately 4,000 small, competitive, independent ISPs in existence today, their progress in realizing this vision of a "local third pipe" has been hobbled by anticompetitive practices and by government policies which favor large providers. Spectrum, for example, is auctionedoff in nationwide slices 5 to 20 MHz wide -- fine for cell phones butinadequate to provide 100 Mbps to multiple homes simultaneously -- ratherthan 100 or 200 MHz slices over the area of a county. What's more, the auction rules and the auction process itself favor large entities withaccess to public capital markets. They allow incumbents with deep pockets to foreclose competition by denying new entrants access to spectrum. They require payment in full immediately at the close of the auction, preventing smaller businesses and startups from "paying as they go" as they build theirbusinesses. They hobble innovation, and destroy opportunities for newentrants, by locking out anyone who arrives with a great idea even one dayafter the auction is over. And because spectrum is not fungible and is subject to warehousing, no market can be made in it once it is sold.In short, auctions are the worst possible mechanism for awarding spectrum. A nonexclusively licensed regime (a la 3660 MHz, but with a single mandatory spectrum etiquette to ensure coexistence) would be far superior and would ultimately raise in far more in income taxes than the auctions raise inone-time fees. Government also fails to support the development of a "third pipe" byfailing to mandate that small providers have access to essential facilities -- including local loops and DSL systems, leased lines to the backbone, and the backbones themselves. Currently, the issue of backhaul -- erroneously labeled "special access" in DC by folks who do not understand that it is not "special" but rather vital -- is dormant both in the FCC and in Congress. The very poor decision in Trinko has allowed anticompetitive practices to fall into the "crack" between antitrust law and FCC regulations, escaping action or even scrutiny. And a decision against LinkLine by the SupremeCourt would essentially reverse what was left of the pro-competitive measures of the Telecommunications Act of 1996, paving the way for the duopoly to crush competition.If we don't want today's competition to be "as good as it gets," we mustdo an about-face in all of these areas. Thousands of willing, able local businesspeople and entrepreneurs are here to take the helm and provide broadband to their communities. All we need to do is give them a fair shake, and we'll have so much bandwidth we won't know what to do with it. --Brett Glass, LARIAT ------------------------------------------- Archives: https://www.listbox.com/member/archive/247/=now RSS Feed: https://www.listbox.com/member/archive/rss/247/ Powered by Listbox: http://www.listbox.com
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Current thread:
- Broadband competition: Is this as good as it gets? David Farber (Aug 22)
- <Possible follow-ups>
- Re: Broadband competition: Is this as good as it gets? David Farber (Aug 26)
- Re: Broadband competition: Is this as good as it gets? David Farber (Aug 26)
- Re: Broadband competition: Is this as good as it gets? David Farber (Aug 26)