Ev Ehrlich's Everyday Economics

Accentuate The Positive

The Chairman of the Federal Communications Commission is scheduled today to release his long-awaited National Broadband Plan, but like any such release, parts of the work are already osmoting through the permeable boundary of the media.  The Chairman himself published an overview of the report in Sunday’s Washington Post,   and the Executive Summary found its way to the Internet yesterday.

Armed with that knowledge, and aware that the devil-containing details are yet to emerge (and in many instances will be determined later), here’s a summary in a nutshell:

Good.

I don’t think anybody across the spectrum of opinions on the future of the Internet disagrees about what the Promised Land looks like, at least when painted with a broad brush.  We all want competitive markets to bring a very fast and very accessible (meaning both convenient and open) broadband Internet to everyone (save for those who outright refuse it) at a reasonable price.

And that’s more than a vapid statement.  Embedded in it are the ideas that: private investment is the key to getting it done; it’s worth paying something to extend the high-speed Internet beyond where it would go if supply and demand found their own level; and we need to “draw” people into broadband, to improve broadband “literacy” among people who don’t now get it or understand it.  You can’t subscribe to the vision of the Promised Land without accepting those implications.

With those ideas as a backdrop, let me tell you three things that are particularly good about what I’ve read so far.

The first is that Broadband is the Thing – meaning it’s more important than other stuff.  If this sounds like truistic pap, you haven’t done enough time in government.  Once something exists in Government World, it lives forever.  When I was Undersecretaryin’ back in the day, I used to tell people that it was a good thing that the country wasn’t 10,000 years old, because there would be a Department of Hunting and Gathering that antedated the Department of Agriculture, and there’d be statistics collected on our  vital national production of pelts and teeth.  When I proposed in 1994 that my agencies stop producing the Index of Leading Economic Indicators – it cost us money and in a world with all sorts of economic forecasters we wouldn’t be missed – I had to go to the White House to explain myself to a group of Cabinet principals.  (Lloyd Bentsen, much to his credit, asked why he was being bothered with this, although not in a particularly gentle way.  I knew Lloyd Bentsen.  Lloyd Bentsen was a friend of mine…)

So when the FCC comes out and says “broadband is more important,” it’s man-bites-dog and ought to be applauded.  It does that by saying that Depression-era programs that subsidize rural telephone provision should be redirected to developing broadband access, and by saying that electromagnetic spectrum -- the range of radiation frequencies over which radio, television, and mobile phone signals move through the air – should be moved away from broadcast television and to mobile phones.   That’s very positive.  Change is not about addition – it’s about substitution.

A second thing that’s good about the Summary is that it recognizes that “wireline” and “wireless” broadband are competitors.  To many people, it’s obvious – young people, for example, who have “cut the cord” and only keep a mobile phone.  There are critics who argue that wireless Internet doesn’t compete with cable, fiber, or copper loop.   But they’re obviously wrong, and it’s a good thing that the FCC agrees that all of these are part of the same “ecosystem.”  (That’s the word the FCC uses in its report, and it’s a bit of a euphemism.  I suspect they don’t want to say “market,” which would straight-out tell the critics they’re wrong, so “ecosystem” it is.)

In fact, the real danger isn’t that wireless broadband won’t compete with “wireline,” but that it will overwhelm it.    Wireless is getting fast fast  -- this year we’ll see the introduction of LTE, or Long-Term Evolution, the “next thing” after 3G phones.  PCWorld recently reported that company tests of this technology showed speeds of 5 to 12 meg, comparable to what’s already in homes, and Verizon expects to have it in 100 million customers by the end of the year.   Look at the adoption of mobile phones at the expense of wireline ones – people want mobility.  Try it this way – which do you think will disappear 50 years from now – mobile phones or wired handsets?

So once you accept that wired and wireless broadband are in the same market, or “eco-system,” or fraternity, or phylum, or whatever, the broadband market becomes competitive as all get-out.  You’ve got cable companies, telephone companies, the Big Four wireless providers, WiMax by Clearwire, satellite guys (on the periphery, to be sure), and the prospect of more entrants than quitters, because once you have a frequency, it’s a heck of a lot cheaper to offer mobile broadband than to run a hard connection to every home.  And once you accept that broadband is a competitive environment, you have to wonder why we’re agonizing over how to regulate it.  Instead, the focus ought to be where the FCC puts it – on freeing up more spectrum so the wire versus wireless competitive battle for broadband provision can be fought out.

And that leads to the third thing that I like in the FCC report, so far.  In any report, you have to read between the lines, and once you do, the reading becomes subjective.  But Chairman Genachowski, who spent many of the intervening months talking about principles to guide regulation, has now modified his tone.  Instead of providing a framework for regulating broadband providers – mandates like “net neutrality” or “unbundling” requirements that force you to share your investments with your competitors -- he’s chosen to take a different tack.

The report talks about collecting and disseminating “detailed, market-by-market information on broadband pricing and competition.”  It wants to develop “disclosure requirements for broadband service providers” that would be, one presumes, the equivalent of the energy labeling on a new hot water heater or toaster oven.  Together with policies to make more spectrum available, to facilitate construction of new infrastructure (like rights-of-way and access to conduits and poles), and to create high-speed centers as schools, government sites, hospitals, and elsewhere, the report goes in a new direction, emphasizing building competition rather than regulating to, at best, imitate it.  We’ll give consumers information, give them great and helpful stuff at schools and medical centers to connect to, and then let ‘em rip.  But, then again, once you’ve accepted that the broadband market is an “ecosystem” in which wired and wireless competitors are rapidly innovating and changing the landscape, what else can you do?

Moreover, this approach is the quickest way to put new broadband infrastructure in place.  No one is going to volunteer to be the Little Red Hen that makes the multi-billion dollar investments in fiber or cable – or satellites and towers – only to be told that your competitors can use those investments once they’re in place.  By taking this new, pro-competitive route, the FCC is saying that investing to extend the broadband Internet to rural areas and inner-city neighborhoods is the number one priority.   Again, change is about substitution and priorities. 

So there’s a great first step.  Make broadband the priority, recognize the full range of competing options involved (and don’t choose among them), and give consumers the information needed to drive the market.  Or, in the words of the great Johnny Mercer, accentuate the positive, latch on to the affirmative, and eliminate the negative, with the goal of spreading joy to the maximum.

Do it, Mr. Chairman.  Don’t mess with Mr. In-Between.