Ev Ehrlich's Everyday Economics


Ten Buck Broadband

I am knocked out by a report I just came across from the Joint Center for Political and Economic Studies, probably the leading entity that focuses on public policy issues of concern to people of color in America. They paper that changes likely preconceptions on the part of the public – and policy makers – about who’s using broadband, particularly mobile broadband, and why. It’s embarrassing to think you have preconceptions, but it’s redeeming to have them changed by evidence.

Let’s start with an earlier report that puts the Joint Center’s work in context, one by the Pew Research Center, that was released last summer. That report was also startling in its insights into who’s using mobile broadband.

Here are the headlines. More African-Americans (87 percent) own cell phones, compared to whites (80 percent) the difference looks bigger when the income differential between the two roups is considered. And specifically, more African-Americans and Latinos use phones to access the Internet – 46 percent and 51 percent, respectively, as compared to 33 percent of whites. This also jives with results from Nielsen from earlier this year, showing that African-Americans and Latinos were also more likely than whites to own smartphones – 45 percent of Hispanics and 33 percent of African-Americans own them, compared to 27 percent of whites.

But the Joint Center report, which was updated a few weeks ago, goes further. According to the Joint Center’s surveys, 48 percent of African-Americans and 41 percent of Latinos report using wireless broadband service as compared to their white counterparts (38 percent). And then there’s what people do with their devices; 41 percent of African-Americans and 35 percent of Latinos, as opposed to just 21 percent of white Americans, report using wireless broadband to keep in touch with doctors and other healthcare providers. And perhaps the most interesting finding is that 78 percent of African-Americans and 64 percent of Latinos went online to look for information about finding employment, as compared to just 48 percent of whites. In fact, when the study focused on people with incomes of $20,000 or less, it found 92 percent of African-Americans went on-line to look for work, as compared to 63 percent of such Latinos and 54 percent of such whites. That’s interesting not only because of the differential across groups, but because the percentage of both African-American and white respondents responding that they use mobile broadband to find work goes up when income goes down.

In one sense, this is nothing new. When I was busy Undersecretarying in the 1990s and was deeply involved in the decennial census, one of the most pressing issues we faced was the pattern of non-response, which contorted the allocation of political representation, federal spending, and the like. There was an obvious pattern of racial and ethnic differential response, but the
single most important variable in predicting whether a household responded to the census was whether they owned their own home. African-American and Latin respondents were disproportionately underrepresented in the decennial, but often because they were more likely to not own a home.

But of course. People without stable employment or adequate income move a lot. They split and merge family units, they live in residences that aren’t – what’s the right word? – “zoned” or “permitted,” they change addresses as they find a job or a better deal. “No fixed address” is supposed to mean an itinerant -- a hobo – but if you take its meaning to be weeks and months, not days, it captures much more of the population than simply the homeless. It deals with millions of working poor who, in the memorable words of Jesse Jackson at the 1988 Democratic Convention, “catch the early bus.”

This reality about the economy and its participants hasn’t changed, but the milieu in which it operates has changed, dramatically so. Mobile phones and mobile broadband access are the best alternative for working people who are likely to move soon, for either
good (find new job) or bad (lose old job) reasons. Why even bother with a landline or a wireline broadband connection when you have to endure the fixed and transition costs of setting those things up – often with a contract – when you’re not sure how long you’re going to stay at that place? You can carry that kind of access in your own pocket. The latest release of a regular survey by the Center for Disease Control shows the same thing – 43 percent of adults living in poverty and 35 percent adults living near poverty lived in households that had “cut the cord” – only wireless – compared to 35 percent of higher income adults.

So forget the images of middle-class kids lining up in front of Apple stores to get the latest iThing at the stroke of midnight. The
middle class’ toy is the working poor’s object of necessity.

These results came to mind when reading this story about Federal Communications Commission Chair Julius Genchowski announcing last week that he had enticed a group of cable companies, in concert with other businesses, to produce a program that would have the leading cable companies give poor families – defined as those with a kid in the federal school lunch program
– access to cable-based broadband for $9.99 a month or, as we used to call it, ten dollars, for two years. In addition, they will have access to a $150 computer, a Microsoft operating system, and access to microfinancing to make it work.

Now look, I’m not opposed to anything eleemosynary that a company does, God bless them. And the origins of this program go back to Comcast, which agreed to it when they were given regulatory dispensation to acquire NBC. It would be brusque to call
that a shakedown – it’s more like “street policy,” the equivalent of police dispensing “street justice.” A company comes through wanting something, like a merger approval, you have the right to hit them up for something like this, so long as you keep it reasonable. No harm, no foul.

But the question is whether we’re shaking the wrong tree. That wireline connection and computer may not be what the "unconnected” want. In fact, in some ways, it reproduces what they can get already. For example, here’s a write-up of a service
from Republic Wireless, which offers unlimited voice, text, and data for twenty dollars a month and an upfront investment of $180, as I read it. (It’s a tricky proposition, though, as Republic’s devices go looking for Wi-Fi to rest on before they go to the mobile phone network.) But remember, it’s also a phone, so its package is priced pretty well, even when compared to what the cable companies are offering under this charitable effort. And will it be slower than the 1 meg rating the cable offering includes? Doubt it.

In an unintended way, the cable $9.99 broadband program makes a larger point – wireline and wireless compete, increasingly so, and focusing on wireline to the exclusion of wireless misses what’s happening. And it’s happening so quickly that pronouncements made only a few years ago – perhaps this one, calling for a nationalized fiber network -- look pretty silly. Fiber’s going to be
the broadband backbone for some time to come, but when you think about what’s happened in the two or three years since these “national fiber” proclamations were made – the iPhone, the iPad, Android, the cloud, for Pete’s sake! – they look way off base. Wireless is no more about taking on the phone than wireline is about watching television. They compete to deliver the broader connectivity the modern economy requires, and that customers demand.

So I appreciate the effort on the part of the companies doing this ten dollar broadband thing, but can’t blame the ones who aren’t. If we want to have “universal access,” we need to be better regulators and spend money. We need an open market for spectrum that allows it to go to its most highly-valued uses, as opposed to letting a bunch of broadcast oligarchs hold on to it, a souvenir of a bygone era. We need to put money into helping schools, hospitals, and local governments use broadband as the way they do business, so that the “pull” of functionality attracts those who have some access to broadband but don’t choose to use it. And we need to help states fund plans to deploy broadband within their boundaries by letting wireline and wireless provides compete to offer infrastructure.

I admire Chairman Genachowski for keeping faith with the folks who take the early bus. But the underlying economics are compromising the impact he wants to have. The “digital divide” is real – greater use by people of color of wireless technology is
their attempt to get over it. But the theory that wireless and wireline are separated by another kind of “digital divide” is undercutting our approaches to fixing the original one.

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