The President Wants Competitive Broadband. Good.

Over the last year, the “network neutrality” debate has re-emerged with a vigor reminiscent of the fiery rhetoric of 2010. 

While the FCC dithers on definition and incumbents battle to maintain either their freedom to tier or their freedom to “ride” (depending on the nature of the incumbent), the President last week entered the fray in a related call for more broadband competition and coverage, particularly in rural and underserved areas.

Summing up the President’s proposed initiatives, The Financial Times quoted the White House: “Every American should have options for better, faster broadband…Broadband is no longer a luxury. It’s a necessity. It’s a necessity for businesses, for families, and for our national competitiveness.”

True.  Very true.

Indeed, in 2012, 2013 and 2014, the New America Foundation’s Open Technology Institute released sequential ”Cost of Connectivity” studies, reviewing the cost of consumer broadband services in 24 cities around the world.  In each year, the results showed that, in comparison to their international peers, Americans in major cities such as New York, LA, and DC pay higher prices for slower Internet service.  

Reports from the Organization of Economic Cooperation and Development (OECD), the International Telecommunications Union (ITU) and other public and private or public-private organizations have made similar findings.

It is widely anticipated that we will hear more about the President’s broadband initiatives in his State of the Union speech tomorrow.  But, in short, what he proposed last week, with a special focus on local and community broadband, includes: Eliminating State laws which stymie local broadband competition; Expanding local public-private and R&D-oriented partnerships focused on broadband; Launching a new Commerce Department initiative called BroadbandUSA to promote deployment and adoption; Unveiling new grant and loan opportunities for rural providers; and Removing regulatory barriers and improving investment incentives.

That’s a whole lotta motherhood and apple pie.  Don’t get me wrong, I’m all for it.  There is no acceptable reason that the nation that once occupied the cradle of the Internet should now be camped out in a lean-to.

But let’s take a closer look at that last one: Removing Regulatory Barriers and Improving Investment Incentives…

According to the White House Fact Sheet on the President’s Broadband plans announced last week, “The President is calling for the Federal Government to remove all unnecessary regulatory and policy barriers to broadband build-out and competition, and is establishing a new Broadband Opportunity Council of over a dozen government agencies with the singular goal of speeding up broadband deployment and promoting adoption for our citizens.”

To these points, speaking in Cedar Falls, Iowa last week at the unveiling of his suite of broadband initiatives, the President said: "In too many places across America, some big companies are doing everything they can to keep out competitors…Today, I'm saying we're going to change that. Enough's enough."

True.  Quite true.

Now, let’s take a moment to ensure contextual clarity: The President’s comments about competition, as well as the focus of the broadband agenda he outlined last week, as well as the general gist of the ongoing network neutrality debate at the FCC, are about the provisioning of Internet services and content.

But broadband competition takes place on multiple levels.

Last week I posted on a separate laundry list of Presidential initiatives unveiled last week (it’s that time of year) - a suite of cybersecurity-related policy and legislative proposals.  The gist of my January 14 post (linked) was that the success of the proposed activities – all domestically-focused - might be limited in the absence of broader global initiatives to address truly fundamental and global challenges.

Similarly, the President’s broadband initiatives, at least as outlined last week, are also, um, “half-fast” (thanks Verizon – clever campaign, by the way), at least in terms of addressing the establishment of a more competitive market environment for American broadband.

(Regular readers, you know where this is going).

The New American Foundation, OECD, ITU and other reports on the relative cost of broadband across markets at some point or another – conscious or not – end up depicting some sort of juxtaposition of the European situation vs. the American situation.

It seems, fixed data-speeds and 4G wireless deployment schedules notwithstanding, that Europe has the lead over the U.S. in terms of the average cost of broadband to the average consumer.  One reason, it would seem, is the fact that consumers, even in rural or far-flung areas, have the option to choose among broadband suppliers, which in turn forces those service providers to competitively price their offerings.

In contrast, as the President said in Iowa last week: "Tens of millions of Americans have only one choice for that next-generation broadband. So, they're pretty much at the whim of whatever Internet provider is around.”

But Europe has had the benefit of other competitive pressures as well, pressures that have had not just an impact in terms of lower cost broadband, but also in terms of more innovative broadband. 

In short, Europe has been open to investment and innovative new technologies on a market-based basis, including solutions from world-leading Huawei Technologies, a $47 billion company doing business in over 170 countries, which happens to be headquartered in China.  

Such competition has driven innovation and more rational, market-based pricing of telecommunications equipment across Europe, driving down costs and extending broadband to everyday consumers.

(Perfunctory disclaimer, again: Huawei is my employer, but this blog is my own, the content unvetted, uncleared by any third party).

U.S. Internet and telecommunications service providers have been routinely pressured by the U.S. Government to eschew Huawei gear, based on never-substantiated concerns associated with the company’s heritage in China, concerns which fly in the face of a very important pair of facts: 1) Huawei is deployed by nationwide service providers in virtually every OECD country without incident; 2) All of Huawei’s “Western” competitors are, like Huawei, conducting R&D, building and coding on a global basis, including in China.  To the extent that such presents potential vulnerabilities, they are commonly shared across the industry.

Now, let’s look at a case study that would seem relevant to the President’s initiative to introduce more competition and more broadband in rural markets:

In October of 2012, 60 Minutes profiled Huawei (not terribly accurate, balanced or even responsible journalism, but I guess that’s a matter of one’s perspective). 

During the program, the 60 Minutes correspondent interviewed the President and General Manager of a small local telecommunications carrier who communicated his goal of reaching as far as possible into rural areas, and his observation that “the new Huawei network delivers some of the fastest Internet speeds in the country.”

The carrier President told 60 Minutes that he had been pressured by “federal agents” about Huawei, pressured to buy from someone else. 

In answer to a subsequent question from the 60 Minutes correspondent, the carrier President said he was upset by the visit because he “saw it as interference in our operations. If we're not able to buy the very best equipment and deploy it in an efficient manner, then everybody suffers.” 

Notably, 60 Minutes concluded this segment of its program asking the obligatory question about American bidders on the project, to which the carrier President replied: “I don't know of any American companies that makes this equipment.”

The intervention featured on this particular news program was not an isolated incident.  Indeed, it was an example of a pattern of behavior.  It was indicative of a “policy.”

So yes, Mr. President, by all means, and in the words of the White House, let’s call “for the Federal Government to remove all unnecessary regulatory and policy barriers to broadband build-out and competition.”

All of them. 

And, if for whatever reason there is someone somewhere within the Administration or otherwise that would purport that market-distorting barriers to preclude competition from select companies based on their country of heritage - in an industry that has eclipsed national borders – is “necessary,” then, in the name of the very competition the President seeks, they should be compelled to justify that finding, and publicly.