Friday, October 07, 2011

Broadbanding America

In a speech US FCC Chairman Julius Genachowski has outlined plans for revision to the universal service arrangements to get broadband to rural areas of the USA.

In introducing these reforms he spoke of his visit to Libery Nebraska.

When I was in Liberty, I met with a group of residents at the local American Legion.

The people I met had a lot in common with all of us and all of America. They work hard. They care about their country. They care about their kids. They believe in the American dream, and want their community and children to have as much a chance for success in the 21st century as they had in the 20th.

But in one important respect, their lives are different from most Americans. Most of the people living around Liberty don’t have access to broadband. The infrastructure for high-speed Internet simply isn’t there.

I don’t know whether, a few years ago, they were concerned about the absence of broadband Internet where they live. But during our discussion, the group I met – which ranged from seniors to students -- was very clear that the absence of broadband in their community was having real costs and consequences.

One older man said he wanted to open a hunting lodge. He said he was sure it would be successful, but that without broadband it would be impossible.

A farmer at the meeting said he needs to participate in online auctions for equipment and cattle. He said he can’t without a fast Internet connection that allows him to bid competitively in real-time.

Two parents told me about their son, a young serviceman who has done three tours of duty. His friends overseas were having video chats with their families, but he couldn’t.

Other parents at the table spoke about how their daughters couldn’t access the Internet at home to research papers or email their teachers. They said many of their classmates who lived in other towns were online, and they just wanted the same opportunity for their kids.

It’s not just a theory. It’s a fact. Broadband has gone from being a luxury to a necessity for full participation in our economy and society.

There followed the most horrible description of the failings of their Universal Service Fund and Intercarrier Compensation arrangements. Unfortunately the mess that he was describing as the "Connect America Fund" and the "Mobility Fund" did not really sound much better.

To Australian ears they were sadly reminiscent as the kinds of failed broadband programs we experienced prior to the NBN.

More importantly they constitute the kind of externalised transfer payments that Gans and Hausman think is better than a Government built network.

I have responded to Gans' challenge and made a submission to the ACCC on Telstra's SSU. In that I outline the direct and indirect network effects of broadband and the reasons why the Government's NBN plan is an effective way to internalise the externality.

A real pity that the USA cannot embrace the idea of Government owned infrastructure. They did early in the 20th century briefly consider doing it to the telephone. It is not too late, and far more efficient than spreading cash thinly across poorly designed network initiatives.

Novae Meridianae Demetae Dexter delenda est

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