Category Archives: Broadband

Why is the FCC playing procedural games?

November 30, 2011 ,

America is in desperate need of economic growth. But as the U.S. economy limps along, with unemployment stuck at 9%, the Federal Communications Commission is playing procedural tiddlywinks with the nation’s largest infrastructure investor, in the sector of the economy that offers the most promise for innovation and 21st century jobs. In normal times, we might chalk this up to clever Beltway maneuvering. But do we really have the time or money to indulge bureaucratic gamesmanship?

On Thanksgiving Eve, the FCC surprised everyone. It hadn’t yet completed its investigation into the proposed AT&T-T-Mobile wireless merger, and the parties had not had a chance to discuss or rebut the agency’s initial findings. Yet the FCC preempted the normal process by announcing it would send the case to an administrative law judge — essentially a vote of no-confidence in the deal. I say “vote,” but  the FCC commissioners hadn’t actually voted on the order.

FCC Chairman Julius Genachowski called AT&T CEO Randall Stevenson, who, on Thanksgiving Day, had to tell investors he was setting aside $4 billion in case Washington blocked the deal.

The deal is already being scrutinized by the Department of Justice, which sued to block the merger last summer. The fact that telecom mergers and acquisitions must negotiate two levels of federal scrutiny, at DoJ and FCC, is already an extra burden on the Internet industry. But when one agency on this dual-track games the system by trying to influence the other track — maybe because the FCC felt AT&T had a good chance of winning its antitrust case — the obstacles to promising economic activity multiply.

After the FCC’s surprise move, AT&T and T-Mobile withdrew their merger application at the FCC. No sense in preparing for an additional hearing before an administrative law judge when they are already deep in preparation for the antitrust trial early next year. Moreover, the terms of the merger agreement are likely to have changed after the companies (perhaps) negotiate conditions with the DoJ. They’d have to refile an updated application anyway. Not so fast, said the FCC. We’re not going to allow AT&T and T-Mobile to withdraw their application. Or we if we do allow it, we will do so “with prejudice,” meaning the parties can’t refile a revised application at a later date. On Tuesday the FCC relented — the law is clear: an applicant has the right to withdraw an application without consent from the FCC. But the very fact the FCC initially sought to deny the withdrawal is itself highly unusual. Again, more procedural gamesmanship.

If that weren’t enough, the FCC then said it would release its “findings” in the case — another highly unusual (maybe unprecedented) action. The agency hadn’t completed its process, and there had been no vote on the matter. So the FCC instead released what it calls a “staff report” — a highly critical internal opinion that hadn’t been reviewed by the parties nor approved by the commissioners. We’re eager to analyze the substance of this “staff report,” but the fact the FCC felt the need to shove it out the door was itself remarkable.

It appears the FCC is twisting legal procedure any which way to fit its desired outcome, rather than letting the normal merger process play out. Indeed, “twisting legal procedure” may be too kind. It has now thrown law and procedure out the window and is in full public relations mode. These extralegal PR games tilt the playing field against the companies, against investment and innovation, and against the health of the U.S. economy.

— Bret Swanson

Posted in: Broadband, Mobile

World Broadband Update

June 28, 2011 ,

The OECD published its annual Communications Outlook last week, and the 390 pages offer a wealth of information on all-things-Internet — fixed line, mobile, data traffic, price comparisons, etc. Among other remarkable findings, OECD notes that:

In 1960, only three countries — Canada, Sweden and the United States — had more than one phone for every four inhabitants. For most of what would become OECD countries a year later, the figure was less than 1 for every 10 inhabitants, and less than 1 in 100 in a couple of cases. At that time, the 84 million telephones in OECD countries represented 93% of the global total. Half a century later there are 1.7 billion telephones in OECD countries and a further 4.1 billion around the world. More than two in every three people on Earth now have a mobile phone.

Very useful stuff. But in recent times the report has also served as a chance for some to misrepresent the relative health of international broadband markets. The common refrain the past several years was that the U.S. had fallen way behind many European and Asian nations in broadband. The mantra that the U.S. is “15th in the world in broadband” — or 16th, 21st, 24th, take your pick — became a sort of common lament. Except it wasn’t true.

As we showed here, the second half of the two-thousand-aughts saw an American broadband boom. The Phoenix Center and others showed that the most cited stat in those previous OECD reports — broadband connections per 100 inhabitants — actually told you more about household size than broadband. And we developed metrics to better capture the overall health of a nation’s Internet market — IP traffic per Internet user and per capita.

Below you’ll see an update of the IP traffic per Internet user chart, built upon Cisco’s most recent (June 1, 2011) Visual Networking Index report. The numbers, as they did last year, show the U.S. leads every region of the world in the amount of IP traffic we generate and consume both in per user and per capita terms. Among nations, only South Korea tops the U.S., and only Canada matches the U.S.

Although Asia contains broadband stalwarts like Korea, Japan, and Singapore, it also has many laggards. If we compare the U.S. to the most uniformly advanced region, Western Europe, we find the U.S. generates 62% more traffic per user. (These figures are based on Cisco’s 2010 traffic estimates and the ITU’s 2010 Internet user numbers.)

As we noted last year, it’s not possible for the U.S. to both lead the world by a large margin in Internet usage and lag so far behind in broadband. We think these traffic per user and per capita figures show that our residential, mobile, and business broadband networks are among the world’s most advanced and ubiquitous.

Lots of other quantitative and qualitative evidence — from our smart-phone adoption rates to the breakthrough products and services of world-leading device (Apple), software (Google, Apple), and content companies (Netflix) — reaffirms the fairly obvious fact that the U.S. Internet ecosystem is in fact healthy, vibrant, and growing. Far from lagging, it leads the world in most of the important digital innovation indicators.

— Bret Swanson

Posted in: bandwidth, Broadband , Tagged: ,

One Step Forward, Two Steps Back

November 22, 2010 ,

The FCC’s apparent about-face on Net Neutrality is really perplexing.

Over the past few weeks it looked like the Administration had acknowledged economic reality (and bipartisan Capitol Hill criticism) and turned its focus to investment and jobs. Outgoing NEC Director Larry Summers and Commerce Secretary Gary Locke announced a vast expansion of available wireless spectrum, and FCC chairman Julius Genachowski used his speech to the NARUC state regulators to encourage innovation and employment. Gone were mentions of the old priorities — intrusive new regulations such as Net Neutrality and Title II reclassification of modern broadband as an old telecom service. Finally, it appeared, an already healthy and vibrant Internet sector could stop worrying about these big new government impositions — and years of likely litigation — and get on with building the 21st century digital infrastructure.

But then came word at the end of last week that the FCC would indeed go ahead with its new Net Neutrality regs. Perhaps even issuing them on December 22, just as Congress and the nation take off for Christmas vacation [the FCC now says it will hold its meeting on December 15]. When even a rare  economic sunbeam is quickly clouded by yet more heavy-handedness from Washington, is it any wonder unemployment remains so high and growth so low?

Any number of people sympathetic to the economy’s and the Administration’s plight are trying to help. Last week David Leonhardt of the New York Times pointed the way, at least in a broad strategic sense: “One Way to Trim the Deficit: Cultivate Growth.” Yes, economic growth! Remember that old concept? Economist and innovation expert Michael Mandel has suggested a new concept of “countercyclical regulatory policy.” The idea is to lighten regulatory burdens to boost growth in slow times and then, later, when the economy is moving full-steam ahead, apply more oversight to curb excesses. Right now, we should be lightening burdens, Mandel says, not imposing new ones:

it’s really a dumb move to monkey with the vibrant and growing communications sector when the rest of the economy is so weak. It’s as if you have two cars — one running, one in the repair shop — and you decide it’s a good time to rebuild the transmission of the car that actually works because you hear a few squeaks.

Apparently, FCC honchos met with interested parties this morning to discuss what comes next. Unfortunately, at a time when we need real growth, strong growth, exuberant growth! (as Mandel would say), the Administration appears to be saddling an economy-lifting reform (wireless spectrum expansion) with leaden regulation. What’s the point of new wireless spectrum if you massively devalue it with Net Neutrality, open access, and/or Title II?

One step forward, two steps back (ten steps back?) is not an exuberant growth and jobs strategy.

Posted in: Broadband, Net Neutrality

International Broadband Comparison, continued

October 14, 2010 ,

New numbers from Cisco allow us to update our previous comparison of actual Internet usage around the world. We think this is a far more useful metric than the usual “broadband connections per 100 inhabitants” used by the OECD and others to compile the oft-cited world broadband rankings.

What the per capita metric really measures is household size. And because the U.S. has more people in each household than many other nations, we appear worse in those rankings. But as the Phoenix Center has noted, if each OECD nation reached 100% broadband nirvana — i.e., every household in every nation connected — the U.S. would actually fall from 15th to 20th. Residential connections per capita is thus not a very illuminating measure.

But look at the actual Internet traffic generated and consumed in the U.S.

The U.S. far outpaces every other region of the world. In the second chart, you can see that in fact only one nation, South Korea, generates significantly more Internet traffic per user than the U.S. This is no surprise. South Korea was the first nation to widely deploy fiber-to-the-x and was also the first to deploy 3G mobile, leading to not only robust infrastructure but also a vibrant Internet culture. The U.S. dwarfs most others.

If the U.S. was so far behind in broadband, we could not generate around twice as much network traffic per user compared to nations we are told far exceed our broadband capacity and connectivity. The U.S. has far to go in a never-ending buildout of its communications infrastructure. But we invest more than other nations, we’ve got better broadband infrastructure overall, and we use broadband more — and more effectively (see the Connectivity Scorecard and The Economist’s Digital Economy rankings) — than almost any other nation.

The conventional wisdom on this one is just plain wrong.

Posted in: bandwidth, Broadband , Tagged: , , ,

Chronically Critical Broadband Country Comparisons

March 26, 2010 ,

With the release of the FCC’s National Broadband Plan, we continue to hear all sorts of depressing stories about the sorry state of American broadband Internet access. But is it true?

International comparisons in such a fast-moving arena as tech and communications are tough. I don’t pretend it is easy to boil down a hugely complex topic to one right answer, but I did have some critical things to say about a major recent report that got way too many things wrong. A new article by that report’s author singled out France as especially more advanced than the U.S. To cut through all the clutter of conflicting data and competing interpretations on broadband deployment, access, adoption, prices, and speeds, however, maybe a simple chart will help.

Here we compare network usage. Not advertised speeds, which are suspect. Not prices which can be distorted by the use of purchasing power parity (PPP). Not “penetration,” which is largely a function of income, urbanization, and geography. No, just simply, how much data traffic do various regions create and consume.

If U.S. networks were so backward — too sparse, too slow, too expensive — would Americans be generating 65% more network traffic per capita than their Western European counterparts?

Posted in: bandwidth, Broadband , Tagged: , , ,

Berkman’s Broadband Bungle

December 22, 2009 ,

Professors at a leading research unit put suspect data into a bad model, fail to include crucial variables, and even manufacture the most central variable to deliver the hoped-for outcome.

Climate-gate? No, call it Berkman’s broadband bungle.

In October, Harvard’s Berkman Center for the Internet and Society delivered a report, commissioned by the Federal Communications Commission, comparing international broadband markets and policies. The report was to be a central component of the Administration’s new national broadband Internet policy, arriving in February 2010.

Just one problem. Actually many problems. The report botched its chief statistical model in half a dozen ways. It used loads of questionable data. It didn’t account for the unique market structure of U.S. broadband. It reversed the arrow of time in its country case studies. It ignored the high-profile history of open access regulation in the U.S. It didn’t conduct the literature review the FCC asked for. It excommunicated Switzerland . . . .

See my critique of this big report on international broadband at RealClearMarkets.

Posted in: Broadband , Tagged: , , , ,

What price, broadband?

September 3, 2009 ,

See this new paper from economists Rob Shapiro and Kevin Hassett showing how artificial limits on varied pricing of broadband could severely forestall broadband adoption.

To the extent that lower-income and middle-income consumers are required to pay a greater share of network costs, we should expect a substantial delay in achieving universal broadband access. Our simulations suggest that spreading the costs equally among all consumers — the minority who use large amounts of bandwidth and the majority who use very little — will significantly slow the rate of adoption at the lower end of the income scale and extend the life of the digital divide.

If costs are shifted more heavily to those who use the most bandwidth and, therefore, are most responsible for driving up the cost of expanding network capabilities, the digital divergence among the races and among income groups can be eliminated much sooner.

Posted in: bandwidth, Broadband

Broadband benefit = $32 billion

July 14, 2009 ,

We recently estimated the dramatic gains in “consumer bandwidth” — our ability to communicate and take advantage of the Internet. So we note this new study from the Internet Innovation Alliance, written by economists Mark Dutz, Jonathan Orszag, and Robert Willig, that estimates a consumer surplus from U.S. residential broadband Internet access of $32 billion. “Consumer surplus” is the net benefit consumers enjoy, basically the additional value they receive from a product compared to what they pay.

Posted in: bandwidth, Broadband

Bandwidth caps: One hundred and one distractions

April 30, 2009 ,

When Cablevision of New York announced this week it would begin offering broadband Internet service of 101 megabits per second for $99 per month, lots of people took notice. Which was the point.

Maybe the 101-megabit product is a good experiment. Maybe it will be successful. Maybe not. One hundred megabits per second is a lot, given today’s applications (and especially given cable’s broadcast tree-and-branch shared network topology). A hundred megabits, for example, could accommodate more than five fully uncompressed high-definition TV channels, or 10+ compressed HD streams. It’s difficult to imagine too many households finding a way today to consume that much bandwidth. Tomorrow is another question. The bottom line is that in addition to making a statement, Cablevision is probably mostly targeting the small business market with this product.

Far more perplexing than Cablevision’s strategy, however, was the reaction from groups like the reflexively critical Free Press:

We are encouraged by Cablevision’s plan to set a new high-speed bar of service for the cable industry. . . . this is a long overdue step in the right direction.

Free Press usually blasts any decision whatever by any network or media company. But by praising the 101-megabit experiment, Free Press is acknowledging the perfect legitimacy of charging variable prices for variable products. Pay more, get more. Pay less, get more affordably the type of service that will meet your needs the vast majority of the time. (more…)

Posted in: bandwidth, Broadband, Video

Bandwidth and QoS: Much ado about something

April 24, 2009 ,

The supposed top finding of a new report commissioned by the British telecom regulator Ofcom is that we won’t need any QoS (quality of service) or traffic management to accommodate next generation video services, which are driving Internet traffic at consistently high annual growth rates of between 50% and 60%. TelecomTV One headlined, “Much ado about nothing: Internet CAN take video strain says UK study.” 

But the content of the Analysys Mason (AM) study, entitled “Delivering High Quality Video Services Online,” does not support either (1) the media headline — “Much ado about nothing,” which implies next generation services and brisk traffic growth don’t require much in the way of new technology or new investment to accommodate them — or (2) its own “finding” that QoS and traffic management aren’t needed to deliver these next generation content and services.

For example, AM acknowledges in one of its five key findings in the Executive Summary: 

innovative business models might be limited by regulation: if the ability to develop and deploy novel approaches was limited by new regulation, this might limit the potential for growth in online video services.

In fact, the very first key finding says:

A delay in the migration to 21CN-based bitstream products may have a negative impact on service providers that use current bitstream products, as growth in consumption of video services could be held back due to the prohibitive costs of backhaul capacity to support them on the legacy core network. We believe that the timely migration to 21CN will be important in enabling significant take-up of online video services at prices that are reasonable for consumers.

So very large investments in new technologies and platforms are needed, and new regulations that discourage this investment could delay crucial innovations on the edge. Sounds like much ado about something, something very big.  (more…)

Posted in: Broadband, Cloud Computing, Exaflood, Net Neutrality, Video, Web , Tagged: ,

Apples and Oranges

April 10, 2009 ,

Saul Hansell has done some good analysis of the broadband market (as I noted here), and I’m generally a big fan of the NYT’s Bits blog. But this item mixes cable TV apples with switched Internet oranges. And beyond that just misses the whole concept of products and prices.

Questioning whether Time Warner will be successful in its attempt to cap bandwidth usage on its broadband cable modem service — effectively raising the bandwidth pricing issue — Hansell writes:

I tried to explore the marginal costs with [Time Warner’s] Mr. Hobbs. When someone decides to spend a day doing nothing but downloading every Jerry Lewis movie from BitTorrent, Time Warner doesn’t have to write a bigger check to anyone. Rather, as best as I can figure it, the costs are all about building the network equipment and buying long-haul bandwidth for peak capacity.

If that is true, the question of what is “fair” is somewhat more abstract than just saying someone who uses more should pay more. After all, people who watch more hours of cable television don’t pay more than those who don’t.

It’s also true that a restaurant patron who finishes his meal doesn’t pay more than someone who leaves half the same menu item on his plate. If he orders two bowls of soup, he gets more soup. He can’t order one bowl of soup and demand each of his five dining partners also be served for free. Pricing decisions depend upon the product and the granularity that is being offered. (more…)

Posted in: Broadband , Tagged:

Broadband bridges to where?

April 1, 2009 ,

See my new commentary on the new $7.2 billion broadband program in the Federal stimulus bill. I conclude that if we’re going to spend taxpayer money at all, we should take advantage of local knowledge:

Many states have already pinpointed the areas most in need of broadband infrastructure. Local companies and entrepreneurs are likely to best know where broadband needs to be deployed – and to aggressively deliver it with the most appropriate, cost-effective technology that meets the needs of the particular market. Using the  states as smart conduits is also likely to get the money to network builders more quickly.

And that

After falling seriously behind foreign nations in broadband and in our favored measure of “bandwidth-per-capita” in the early 2000s, the U.S. got its act together and is now on the right path. In the last decade, total U.S. broadband lines grew from around 5 million to over 120 million, while residential broadband grew from under 5 million to 75 million. By far the most important broadband policy point is not to discourage or distort the annual $60+ billion that private companies already invest.

Posted in: Broadband

Rare reason in the broadband debate

March 12, 2009 ,

Calm and reasoned discussion in debates over broadband and Internet policy are rare. But Saul Hansell, in a series of posts at the NYTimes Bits blog, does an admirable job surveying international broadband comparisons. Here are parts I and II, with part III on the way. [Update: Here’s part III. And here’s a good previous post on “broadband stimulus.”]

So far Hansell has asked two basic questions: Why is theirs faster? And why is theirs cheaper? “Theirs” being non-American broadband.

His answers: “Their” broadband is not too much faster than American broadband, at least not anymore. And their broadband is cheaper for a complicated set of reasons, but mostly because of government price controls that could hurt future investment and innovation in those nations that practice it. 

Ask America. We already tried it. But more on that later.

Hansell makes several nuanced points: (1) broadband speeds depend heavily on population density. The performance and cost of communications technologies are distance-sensitive. It’s much cheaper to deliver fast speeds in Asia’s big cities and Europe’s crowded plains than across America’s expanse. (2) Hansell also points to studies showing some speed-inflation in Europe and Asia. In other words, advertised speeds are often overstated. But most importantly, (3) Hansell echoes my basic point over the last couple years:

. . . Internet speeds in the United States are getting faster. Verizon is wiring half its territory with its FiOS service, which strings fiber optic cable to people’s homes. FiOS now offers 50 Mbps service and has the capacity to offer much faster speeds. As of the end of 2008, 4.1 million homes in the United States had fiber service, which puts the United States right behind Japan, which has brought fiber directly to 8.2 million homes, according to the Fiber to the Home Council. Much of what is called fiber broadband in Korea, Sweden and until recently Japan, only brings the fiber to the basement of apartment buildings or street-corner switch boxes.

AT&T is building out that sort of network for its U-Verse service, running fiber to small switching stations in neighborhoods, so that it can offer much faster DSL with data speed of up to 25 Mbps and and Internet video as well. And cable systems, which cover more than 90 percent of the country, are starting to deploy the next generation of Internet technology called Docsis 3.0. It can offer speeds of 50 Mbps. . . .

(more…)

Posted in: Broadband , Tagged:
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