Tales of the Sausage Factory

Can RUS Turn $2.5 Bn to $25 Bn? Loan Gaurantees May Work Better Than Loans or Grants.

Unsurprisingly, a lot of folks at David Isenberg’s excellent Freedom 2 Connect Conference this past week had a lot of attention focused on the stimulus. Most of the discussion has centered around NTIA’s Broadband Technology Opportunity Program (BTOP) Rather than around the US Department of Agriculture’s Rural Utilities Services (RUS) Program. After all, BTOP has more money ($4.7 bn to RUS’s $2.5 bn) more potentially eligible grantees, and more terms that will need definition.

But the $2.5 Bn for rural broadband is certainly nothing to sneeze at, and because of its more specific focus (rural infrastructure build rather than broader digital inclusion) and narrower set of eligible applicants, it may have greater opportunity to do some very clever things to maximize the impact of its spending. On the one hand, $2.5 Bn is more money than we have ever seen committed by the federal government to building rural broadband access infrastructure. OTOH, it is a pitifully small amount when compared to what most folks think it will take to bring meaningful broadband to rural America. Ideally, therefore, every dollar spent should stimulate more spending in this area.

Enter Geoff Daily at App-Rising, who writes this intriguing piece on how to leverage the wackiness of the financial system to our advantage (for a change). Unlike NTIA, which gives only grants, RUS can give loans and loan guarantees as well as grants. in fact, RUS has traditionally given loans and loan guarantees rather than grants. Geoff thinks this provides a way to turn the RUS $2.5 Bn into $25 bn in actual spending on rural broadband infrastructure. Unfortunately, it runs into a Dilbert-esque paradox. This is such an efficient and effective way for the government to use the money RUS is afraid that Congresscritters and pundits eager to declare the stimulus a failure will point to RUS’ “unspent” loan guarantees as a sign of waste and a failure to “spend” the money.

Fortunately, I think RUS can set up the program in a way that minimizes this risk.

More below . . .

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Posted in Tales of the Sausage Factory, The Stimulus Package (ARRA) | Also tagged , , , | 1 Comment (Comments closed)

Tales of the Sausage Factory

The McCain Tech Policy Part II: Why McCain Can’t Fix The “Mercedes Divide?”

O.K., jokes aside about the lameness and lateness of McCain’s tech policy and associated privacy policy. How does this all really stack up as a substantive plan?

Two quotes from former FCC Chair and McCain tech adviser Michael Powell nicely illustrate the fundamental thrust of the plan. Not so coincidentally, both come from Powell’s first press conference as Chair of the FCC.

Quote 1.

“I don’t believe deregulation is like the dessert that you serve after people have fed on their vegetables, like a reward for competition,” Powell said. “I believe deregulation is instead a critical ingredient to facilitating competition, not something to be handed out after there is a substantial number of players and competitors in the market.”

Quote 2:

“I think the term [digital divide] sometimes is dangerous in the sense that it suggests that the minute a new and innovative technology is introduced in the market, there is a divide unless it is equitably distributed among every part of the society, and that is just an unreal understanding of an American capitalistic system. I think there is a Mercedes divide. I would like to have one, but I can’t afford one. I’m not meaning to be completely flip about this. I think it’s an important social issue, but it shouldn’t be used to justify the notion of, essentially, the socialization of deployment of the infrastructure.”

Once you accept the “Mercedes Divide” frame, you have run out of tools to deal with the issues because, by definition, whatever the market provides is what result you should get. McCain, obviously, does not wish to accept this rather obvious consequence, and therefore falls back on the usual platitudes and reliance on the gods of the marketplace, the competition fairy, and the delightful myth that — Adam Smith to the contrary — getting a collection of companies with similar interests together to regulate themselves will somehow work.

Surprisingly, as David Isenberg noted on his blog, what is amazing is that the plan leaves out the few bright stars of Michael Powell’s tenure at the FCC — notably Powell’s commitment to spectrum reform. While I certainly opposed Powell’s efforts to make spectrum licenses a species of property I enthusiastically applauded his equal willingness to engage seriously on opening more spectrum for non-exclusive unlicensed use (you can see a very old primer of mine from the dawn of the spectrum reform debates here). Perhaps spectrum reform proved too complicated or controversial an issue for McCain to address, even buried at the bottom of a tech policy.

But having ruled out open spectrum, McCain has left himself very few tools to actually provide all the benefits he promises. Rather like the current administration, which will tell you that Bush achieved his 2004 promise of universal broadband by 2007 so shut the heck up about those stupid international rankings, McCain’s tech platform will work swimmingly for true believers unconcerned with the impact on actual reality. Below, I draw out the substantive problems with the McCain tech & privacy plans in greater detail, and explain why the Obama plan actually looks like it would make real improvements in people’s lives because Obama recognizes that there is a real difference between “the government needs to build roads rather than wait for car companies to build them” and mandating that “everyone must have a Mercedes.”

More below . . . .

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Posted in How Democracy Works, Or Doesn't, Life In The Sausage Factory, Tales of the Sausage Factory | Also tagged , , , | Comments closed

Tales of the Sausage Factory

Can users shape traffic better than ISPs? Some Lessons From The Electric Industry.

A dialog between David Weinberg and Seth Finkelstein on David’s blog raises an interesting question. Dave W argues (as do I) that a network provider is the last person who should engage in such practices, because of the inherent potentials for mischief and the possible conflicts of interest. Seth Finkelstein argues that, as a practical matter in the real world, only the ISP can effectively make a determination on traffic shaping that maximizes the use of the network for everyone, protects time sensitive applications, and prevents a “tragedy of the commons” from a handful of users absorbing all the bandwidth.

David Isenberg (in the comments and in this blog entry) makes the case that we don’t need traffic shaping, just more capacity or, in the alternative, neutral means to reduce packet flow such as throttling all traffic equally or going to metered pricing. Others (including myself) have argued that the problems of “bandwidth hogs” are exaggerated, or that users dissatisfied with the “best efforts” environment of the internet should stick with the network optimized for voice (the phone network) or the network optimized for video (cable, broadcast television) rather than “break” the internet to better accommodate these applications. Neither of these answers, however, is popular in regulatory circles. Further, it is a legitimate argument that we should allow ISPs to choose what product to offer customers. If an ISP wants to offer services optimized for VOIP by retaining the power to shape traffic, why shouldn’t it bring that service to market? This inevitably leads to a debate on market power, availability of choice, switching costs, captive customers etc., etc.

So lets shake things up with something new. I will — for the sake of argument here — accept the proposition that we “need” traffic shaping (like I “need” “scare quotes” so that people will not “quote” me out of context or argue on trivialities). But accepting the need for traffic shaping does not mean ceding all power to the broadband access provider. To the contrary, I argue that we will achieve far better results by giving subscribers the ability to shape their own traffic.

Madness you say? “Tragedy Of The Commons” and all that. Maybe, but the electric industry tells a somewhat different tale. As described in this NYT story, a fair number of folks are taking advantage of pilot projects that allow people to shape their power usage in the same way I propose allowing them to shape their Internet use. Such programs may save $70 Billion in the next few years. Why not see if they can have serious impact on the supposed exaflood of internet traffic that supposedly justifies traffic shaping? Especially when contrasted with the pur privatization model, that gave us the Enron scandal and the California black outs in 2001?

More below . . .

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Posted in Series of Tubes, Tales of the Sausage Factory | Also tagged , , , , | 3 Comments (Comments closed)

Tales of the Sausage Factory

David Weinberger's Excellent Piece On Structural Separation

Despite the efforts to make common carriage and structural separation of wholesale and retail services a forbidden topic of discussion (go read the piece Greg Rose and I wrote last year on how industry rationalizes policy by controlling the debate), the old and highly successful idea of structural separation for carriers continues to undergo a significant revival. For starters, the Europeans have recently embraced structural separation as a policy goal, and have consequently begun kicking our rear ends in broadband speed, price and overall adoption. For another, some of us do not forget that structural separation used to be the law under the Computer Proceedings, and that this old form of open access is what gave us the internet in the first place. Finally, the argument advanced that simply because we have more providers in the market, the underlying rationale for structural separation goes away, as always struck me as poor policy driven by ideology.

I am pleased to see that David Weinberg has now written this excellent piece on structural separation. This marks the second internet “thought leader” to offer well-written and challenging pieces pleading the case of structural separation, the first being David Isenberg’s Making Network Neutrality Sustainable. Both these authors make the case for the next logical step in the Network Neutrality fight — going back to a set of rules that will prevent the network operators from interfering with the content that flows over the network by altering the economic incentives of the carriers.

Not surprisingly, we can anticipate two responses, the standard antiregulatory response (“Regulation is bad, hmmmmmmKay….Cause, if you do the regulation, then, that’d be government, and big government is bad, hmmmmmmKay….so regulation is bad, hmmmmmKay……”) and the economic response about how such a scheme destroys producer incentives so networks don’t get built. The chief problem with the producer incentive argument, however, is that the empirical evidence in Europe and Asia appears to prove the opposite case: a combination of structural separation and government subsidy facilitates deployment and maximizes incentives and revenue throughout the value chain, while focusing strictly on incentives for core network providers (e.g., the AT&T’s and Comcasts of the world) produces inferior results by every metric other than network operator profits.

My key takeaway here is that we continue to see a revitalized public policy debate that moves beyond the timid counsels of the edge-based industry players who define their “ask” in terms of what the incumbents have defined as possible, and despite every effort by the incumbents and their supporters to convince the broader public that “network neutrality” is dead and lawmakers should not worry their pretty little heads about it. Yes, we are in a legislative lull at the moment, as the public policy pendulum swings away from the incumbents and towards a more aggressive public policy more in line with the broadband success stories of Europe and Asia. But as Weinberg and Isenberg have shown, the public education and public debate remains quiet lively and continues to advance.

Stay tuned . . . .

Posted in Series of Tubes, Tales of the Sausage Factory | Also tagged , , , , | Comments closed

Tales of the Sausage Factory

Blog Tagged by Susan Crawford

On Live Journal, we’d call this a meme. I usually don’t play, but how can I resist an invitation from Susan Crawford? In addition to running a fantastic and informative blog of her own, Susan is a member of the Board of Directors at ICANN and on the faculty of Cardozo Law School (Official motto: “With This Many Jews, How Did We Rank So Low In U.S. News & World Report? Goyishe Kop!”)

In any event, Susan has tagged me with the following meme:

“Post five things most people don’t know about you, and then tag five more people.”

I tag Sascha Meinrath, Esme Vos, David Isenberg, Tim Karr and Art Brodsky. My answers below.

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Posted in Tales of the Sausage Factory | Also tagged , , , , , | 2 Comments (Comments closed)

Tales of the Sausage Factory

New Unlicensed Wireless Blog

Those interested in the unlicensed revolution should tune into a new blog wireless unleashed. The four contributors: Kevin Werebach, Andrew Odlyzko, David Isenberg, and Clay Shirky are among the most articulate and visionary writers about spectrum issues today. The blog covers a wide range of issues from the technical to the legal to the philosophical. I’ve put it on my morning favorites list, and I hope you do too.

Posted in Tales of the Sausage Factory | Also tagged , | 1 Comment (Comments closed)
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