Search Results for: "out of the way"

Just how fast is fast enough for broadband?

I last wrote about this 3 years ago, challenging the myth that universal fibre should be on the national agenda.

A couple of weeks ago, the FCC launched an inquiry [pdf, 155KB] to examine that question. The FCC intends to look at “universal deployment, affordability, adoption, availability, and equitable access to broadband”. The FCC Chair, Jessica Rosenworcel says the intent is to update the US broadband standard (currently 25Mbps down, 3Mbps up) to 100/20 and set a long-term goal for gigabit speeds.

The FCC Chair said that the 25/3 standard “is not only outdated, it masks the extent to which lowincome neighborhoods and rural communities are being left offline and left behind.”

However, FCC data shows that 94% of US households had 100 Mbps access available by the end of 2021. According to Eric Fruits of the International Center for Law & Economics (ICLE), “If the FCC wants to increase the number of households with 100/20 Mbps speeds, it should recognize that much of the gap is driven by lower rates of adoption, rather than a lack of access to higher speeds.”

That is a familiar refrain for my readers. “The problem of increased broadband adoption can’t be fixed directly by throwing money at it, but we need to undertake more serious research into those factors that stand in the way of people subscribing to broadband.”

A September brief from ICLE was entitled “Finding Marginal Improvements for the ‘Good Enough’ Affordable Connectivity Program”. ICLE found that “about two-thirds of households without at-home internet have access, but don’t subscribe. The brief argues that, for households without a broadband subscription, their smartphone internet service may provide a superior “bang for the buck” relative to fixed broadband.”

Just as mobile devices have become a substitute for wireline home phones, we need to examine the extent to which smartphones and mobile services are substitutes for home internet connections.

In 2021, Pew Research found that 19% of respondents said the most important reason for not having broadband at home is that their smartphone does everything they need to do online. That study found that 15% of US adults are “smartphone-only” internet users – that is, they have a smartphone, but do not have a home broadband connection.

What is the best approach for encouraging continued broadband investment?

Do regulators need to raise targets? CRTC data shows that more two thirds of Canadian broadband subscriptions were already at speeds of 100 Mbps or higher, well above Canada’s broadband objective. Ninety percent of households had access to 100 Mbps service by year end 2021; more than three quarters of Canadians had access to gigabit speeds.

When there is demand for higher speeds, doesn’t this demonstrate companies will make the necessary investments? As I have said many times before, the future can be brighter for Canadian innovation and investment if the government would try harder to get out of the way.

It’s already too late for government broadband funding programs to help rural Canadians get better broadband this year. But, there are still ways that governments can (and should) support new investment.

A few weeks ago, I wrote “Announcing a coming announcement”, which mentioned Ontario’s re-announcement of a program first announced almost a year ago. Last week, the Ontario Government finally released the application guide for ICON – Improved Connectivity for Ontario. For the first round of funding, applications are due August 21 and the government will consider projects that only require up to 25% in provincial support. A little more digging into the Program Guide [released by the government in Word docx format] reveals that funding offers won’t be made until April 21, 2021, so construction may actually begin in the summer of 2021.

In the case of federal funding, recall that Rural Economic Development Minister Maryam Monsef told the Rural and Remote Broadband Conference that a call for applications for the Universal Broadband Fund would be released “in the coming days”. That was over a month ago.

I think we are now well past “in the coming days”, we’re past “in the coming weeks”, and now have to score this one as “in the coming months”.

Remember, this is just to get to the point of announcing the application process. Not a single government subsidized shovel will go in the ground in 2020 to help extend the reach of high speed broadband service for rural Canadians.

It is sometimes painful to watch the glacial pace of government responding to the need for more investment in broadband facilities.

All hope should not be lost, however.

There is still private investment being made. For months, there have been announcements of fibre routes being extended and fixed wireless capacity expansions from carriers large and small. And as I wrote, the federal government can accelerate rural broadband expansion with immediate effect by simply reducing spectrum fees now, instead of waiting until next April 1. Recall, the reduced fee schedule was originally set for 2020, but was delayed a year for no apparent reason.

Not all investment in rural broadband needs to come from government coffers. Government funding of broadband distorts the marketplace. When government funds are provided to one service provider, it has a permanent advantage over its competitors.

What is needed from governments, at all levels, is to enact policy in ways that encourage increased private sector investment in new facilities.

Every policy pronouncement, every regulatory ruling, needs to be examined through lens that asks “will this help get broadband extended or expanded for more people?” We have a national service objective that we need to keep in focus.

In the meantime, the overhang from potential government funding announcements has the potential to delay private sector investment.

Indeed, the promise of next year’s lower spectrum fees for point-to-point connections is delaying investment in upgrading umbilical connections to rural broadband radio towers, delaying service upgrades, and delaying availability for new subscriber connections. As I suggested 2 weeks ago, the federal government should advance the implementation of the new fee schedule to take effect immediately.

Fixing this needs to be a priority for the federal government. It will likely delivery the greatest impact for the least cost.

More than 10% of Canadians still don’t have a residential broadband connection. The next school year opens in a month and a half and for many, we are looking at more online learning.

How can government move faster to get more broadband access, and faster broadband access, available to more people?

Sometimes, it can be easy as getting out of the way.

We need more broadband.

People who aren’t connected need to get connected. Almost everyone who is already connected needs, or at least wants, to get connected faster and connect more devices to that faster connection.

So, I think it’s safe to say, “we need more broadband.”

The points of disagreement are found in trying to answer the question of “how do we get there?”

Over the past few weeks, I have written a number of posts looking at some of the arguments being set out. I think it’s worth your time to have a look at these posts:

• Fact checking rural broadband • May 4, 2020
• Words matter. Accuracy matters • May 13, 2020
• A more evidenced based approach is warranted • May 19, 2020
• A key to recovery? Communications leadership • May 25, 2020
• Policy-based evidence making • June 1, 2020
• Hey buddy, can you spare a computer? • June 2, 2020
• Great networks are just a part of the equation • June 8, 2020
• Should broadband be a ‘public utility’? • June 15, 2020
• Announcing a coming announcement • June 17, 2020
• An easy way to increase rural broadband speeds • June 22, 2020

But, of course I think it’s worth your time to follow those links and read those pieces. After all, I wrote them. There have been a lot of articles over the past few months – indeed over the past few decades – discussing broadband issues.

There is a real challenge for policy makers.

Despite everyone calling for more investment in rural broadband, and lots of levels of governments allocating money, there is a feeling that our wheels are spinning without getting us anywhere, or at least not moving fast enough toward the objective.

As we approach the Canada Day holiday, the mid-point of the year, it is pretty much too late for any of the government funding programs to have a material impact on rural broadband expansion in 2020. And, we still don’t seem to have any kind of focus on working to understand the factors that are standing in the way of broadband adoption among those who already have access to affordable connectivity.

Do we have too many layers of bureaucracy working on rural broadband funding programs? Despite multiple agencies at regional, provincial and federal levels, there just doesn’t seem to be enough progress being made.

Those spinning wheels, the “announcing a coming announcement” effect, led me to write last week’s “An easy way to increase rural broadband speeds”. That post describes a way for government to simply accelerate the already planned lowering of license fees for point-to-point radio spectrum, the kind of connection that rural broadband service providers use to connect their fixed wireless towers to their core networks. The government was already planning to lower the fees, recognizing that the current high rates for spectrum fees are inhibiting capacity expansion by rural ISPs.

Accelerating the spectrum fee reduction is a move that is consistent with a philosophy I have long espoused: for government to create an environment that encourages private sector investment and then get out of the way.

I wonder if broadband expansion is sometimes being inhibited, not stimulated, due to process delays associated with some of the government funding programs. When an ISP submits a proposal for funding, how often is work on that area frozen until a response is received?

Can our government agencies to do better? Can broadband programs be structured better? Are there more efficient ways to deal with allocating funding to stimulate supply? Will some of those efficiencies enable agencies to start work at stimulating demand, and not just supply?

With so many different agencies at every level of government creating broadband funding programs, I’m not sure it is a case of too many cooks stirring the pot; one might ask if we just might have too many pots, generating too much overhead and frankly, not delivering enough results.

In his remarks to the National White House Conference on Small Business in 1986, Ronald Reagan said “Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”

“Tax it, regulate it, subsidize it” comes to mind when I look at how we seem to be approaching too many elements of Canada’s digital economy.

Last Friday, I read an opinion piece in the Wall Street Journal written by former FCC Chief Economist (and current professor of Economics at Clemson) Thomas Hazlett, “A Lesson for Today’s Tech Trustbusters”. In it, he writes of the angst caused by the $183B acquisition of Time Warner by AOL in 2000.

Regulators feared AOL’s acquisition of Time Warner would stifle innovation. University of Michigan economist Jeffrey MacKie-Mason, who wrote the Federal Trade Commission’s report, said that the combination “will horizontally and vertically increase AOL’s power in the market for internet online services,” which would have anticompetitive effects and harm consumers.

As Hazlett notes, executive mismanagement and clashing corporate cultures are generally cited as reasons for the failure of the merged companies, “But the episode holds lessons for politicians and antitrust regulators, who too often view market rivalry too narrowly.” His article describes the regulatory measures to force AOL to open up its instant messaging platform and how it was quickly superseded by technology. “Texting, Skype, FaceTime, WhatsApp, Facebook Messenger, Twitter and Instagram displaced AOL’s chatting program. None of these new entrants connected with Instant Messenger, or one another, and it didn’t seem to matter.”

Hazlett also notes that this example was hardly isolated. “In 2005 the Bush administration prevented Blockbuster from acquiring Hollywood Video on antitrust grounds: The merger would threaten to monopolize video rentals.”

Consider what is happening in Canada. Recall the CRTC’s interventions into how streaming services Crave TV and Shomi should be offered to consumers? Was regulatory action required or couldn’t the marketplace figure it out?

Why is the CRTC continuing to interfere with service providers seeking to lower monthly device payments for consumers? As I have written before, some aspects of the Wireless Code raised the monthly cost of mobile and removed an important choice from consumers.

What purpose is actually served by limiting device amortization to 2 years?

Customers can still switch at will anytime during the contract period. They just have to pay off the balance owing. With higher device costs, people have hefty balances owing anyway, whether it is a two or three year contract.

Eliminating the regulatory restriction on longer contracts could lead to carriers offering direct consumer incentives to switch: “Come to us and we will pay up to $600 of your remaining balance.”

Once the Commission allowed consumers the right to leave a carrier by simply paying off the remaining balance, what purpose is served by the further regulation of how long the amortization period could be?

If the CRTC gets out of the way, surely the marketplace can solve the challenge of consumers wanting to switch service providers before their payments are complete. If new entrants find it tough to lure customers away, they can always pay off the device balance for the new customer and take over the loan. Was there sufficient evidence of a failure in the marketplace to develop a solution before the CRTC intervened so dramatically to remove the choice of a longer amortization period?

Last week, I wrote “Hindsight may be 20/20, but as so many investment prospectuses warn, past performance is no guarantee of future results.”

When we develop policies, we need to resist politically expedient routes and think 3 moves ahead, playing the game more like a chess master than a novice. Communications policy issues are complex and often benefit from looking at secondary and tertiary impacts, trying to contemplate unintended consequences.

As Hazlett has written, there are lessons to be learned from looking at market rivalry or defining the market too narrowly.

“Tax it, regulate it, subsidize it.”

You don’t need to look very hard to see how so many elements of Canada’s digital economy strategy fall into one or more of these categories.

Can we consider a better approach?

Twice before, I have written posts entitled “Getting out of the way” [July 9, 2012 | April 6, 2016]. I wrote another entitled “Keeping out of the way”.

I continue to think “the future will be brighter for Canadian innovation if the government would try harder to get out of the way.”

Yesterday, the US Court of Appeals for the District of Columbia released its decision [186 pages, pdf] in Mozilla v. FCC, better known as the challenge to the FCC’s Restoring Internet Freedom order.

A few excerpts are notable from my initial read. Among the first paragraphs is this summary:

Petitioners––an array of Internet companies, non-profits, state and local governments, and other entities––bring a host of challenges to the 2018 Order. We find their objections unconvincing for the most part, though we vacate one portion of the 2018 Order and remand for further proceedings on three discrete points.

On the question of broadband investment being inhibited by heavy-handed regulation and being promoted under the FCC’s lighter-touch approach:

We are, in short, unpersuaded by Petitioners’ and Intervenors’ objections to the Commission’s finding and their implicit claim that uncertainties associated with that finding render arbitrary the Commission’s overall judgment—that there are net public policy benefits from reclassification, based not only on a likelihood of increased investment and innovation but also on the absence of any “discernable incremental benefit relative to Title I classification.”

The court discusses the economic analyses at length, including a criticism of “Mozilla does not address shortcomings of the Free Press figures, pinpointed by the agency, including for example its failure to exclude investment abroad.”

As to the benefits of a “light-touch” regulatory approach,

the 2018 Order’s transparency rules—combined with the deterrent effects of “market forces, public opprobrium, and enforcement of the consumer protection laws”—can “mitigate potential harms.”
…
In sum, a “light-touch” approach can in the Commission’s judgment secure Internet openness and encourage innovation at lower cost than the Title II Order, while yielding unique benefits.

The court’s decision is quite readable, as are the 2 concurring opinions and the third appended opinion that concurs in part and dissents in part (with respect to the part of the ruling that vacates the FCC’s preemption of state law. While a number of media accounts seem to suggest that the ruling will allow state-by-state regulation of net neutrality, this is an incorrect reading.

There are discussions throughout the court ruling that appear to be quite relevant to Canada’s regulatory environment.

In “Keeping out of the way”, I wrote: “I continue to look optimistically to the future. As I have written before [such as here and here], the future will be brighter for Canadian innovation if the government would try harder to get out of the way.”