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They are allocating $200B impossibly fast, and the key Congressional people are not experts. Lobbyists with “access” have slipped in some errors. The worst - the $1B earmark for Verizon even if they didn’t build a single additional line - may have been blocked after the NY Times picked up the story. These are still open.
1) Recognize that some broadband spends creates U.S. jobs and other spending does not. Far too much of the latter seems to be in the bill. Building networks needs labor, domestic steel and concrete, and U.S. engineers. Pretty good job creator. Adding equipment to existing networks is a poor job creator, because most telecom equipment is produced abroad.
2) Don’t subsidize what would be built without subsidy if at all possible.
3) Figure out why the cost of Jay Rockefeller’s credits is $128 million according to the official estimate and possibly $billions according to top analysts
4) Problem: The Rural Utilities Service has a 30-40% default rate on their existing broadband loans,
5) Problem: There’s $200-$400M that people think is mapping but actually is some ill-defined community technology project or worse. Mapping can be done in three months for less than 5% of the money allocated.
6) Auditing must be much expanded.
February 6. I hear rumors of changes the Senate made last night, but don't have firm details. Then it goes to a conference committee, where the Senate and House produce a final version. Lots of horsetrading still ahead, and a possibility to fix some of the problems in the current drafts.
1) Recognize that some broadband spends creates jobs and other spending does not. Far too much of the latter seems to be in the bill. Building networks needs labor, domestic steel and concrete, and U.S. engineers. Pretty good job creator. Adding equipment to existing networks is a poor job creator, because most telecom equipment is produced abroad.
On wireless, Building 3G/4G towers for the unserved is the best way to bring megabits to 98%-99% of the population in two years and should be top priority. Adding more gear to existing towers creates few jobs because it’s mostly equipment. Steve Largent apparently persuaded Jay’s people to include upgrades.
On DSL/fiber, increases in Verizon’s FIOS and other fiber to the home builds are mostly job creating. But FTTN - fiber to local cabinets like Qwest and AT&T U-Verse - is a bad way to create jobs. Qwest and AT&T designed FTTN to minimize the use of labor, by taking advantage of the existing copper, cabinets, and conduit. Minimizing labor is not the way to create jobs.
2) Don’t subsidize what would be built without subsidy if at all possible.
Very little is going into the unserved 4-7%, so that is probably incremental. But in territory, we know Verizon, AT&T, and other carriers have huge builds in progress, most of which are already planned and defined. The easy way to come pretty close is to only subsidize additional spending over 2008.
There also should almost never be a subsidy for hooking up a customer. Building a network is speculative, but when you have a customer you know you will get paid. So companies would spend that money anyway. That applies to cell phones, home gateways and set tops, inside wiring, and satellite dishes.
It’s also likely the companies will build without subsidy when the payback is clear. AT&T, Verizon or Sprint are aggressively expanding 3/4G to almost all existing towers; the subsidy will not make many jobs because it will add few sites. It’s a particularly bad waste of funds because most of the money goes to equipment.
I also believe that essentially all cablecos facing Verizon FIOS will upgrade. Telcos facing DOCSIS 3.0 will probably upgrade, as AT&T is doing with U-Verse. So the “underserved” category should be sharply restricted. If Comcast is delivering 50 meg to a city, I don’t see any reason for a large subsidy for Qwest to come in much slower.
3) Figure out why the cost of Jay Rockefeller’s credits is $128 million according to the official estimate and possibly $billions according to top analysts who have closely read all the available documents, as reported in the NY Times and elsewhere. There’s a very good chance that the language of the bill will allow massive credits that were not intended and/or will simply go to builds already committed and financed. The Senate likes tax credits because they are quick and time is of the essence, but they easily are abused.
4) Problem: The Rural Utilities Service has a 30-40% default rate on their existing broadband loans, and the next $billion or two is likely to be harder to place with borrowers who will repay.
Solutions (not very good): Eliminate from the bill any obligation for the money to be spent if there are not enough sensible ways to spend it. RUS was constantly criticized for not getting the money working, and wound up making bad loans. Hilda Gay Legg was funding projects at 3 or 4 times what the likely returns would cover, and failure was predictable.
Allow in the budget for a realistic default rate, close to related default rates. The figure for reserves in the bill is much too low.
Drastically upgrade the staff with people who know how to judge a startup or new venture; get the auditors in early, while getting full data from all but the smallest project. That usually will mean a certified statement.; put all the details of how the money will be spent on the web, as promised. I know the price of a DSL modem, and if I had all the data I bet I’d find some projects paying 5-10 times as much. Allow FOIA, and make available all but profoundly confidential data.
Details: RUS is a disaster already in progress. They have had 30-40% of their broadband loans go into default already because they didn’t have the skill to avoid bad business plans. Congress and the FCC put on enormous pressure for them to make the loans, and they wound up shoveling money the wrong places. The bill implicitly presses them to use all the money; the incentive should be the opposite, to make sure public money doesn’t go into a black hole and fail to create jobs. There are enough real opportunities to spend the $6B if they do things right.
5) Problem: There’s $200-$400M that people think is mapping but actually is some ill-defined community technology project or worse. Mapping can be done in three months for less than 5% of the money allocated.
Solutions: Make sure the carriers don’t hold back information the mapper needs. If Verizon etc. weren’t stonewalling, we would have had a map in 2005 for a cost well under $10M. That means you don’t need to allocate so much money.
Recognize that the “broadband demand stimulus” is a total crock, an army of patronage bureaucrats who will have little effect. Most people know what the Internet is. Most without broadband are poor or elderly. The way to help the poor is to bring down the price. The elderly might respond to gentle training opportunities, but not to rah-rah promotion about how great the Internet is. Instead, follow the Senate plan of making these funds community training, and spend that wisely.
Treat this like an educational program, measuring often to see whether there are results. Cass Sunstein knows how to do it, so bring those folks in early.
Everyone likes mapping, which can and should be accomplished in three months for less than $10M. The $350M in the bill for mapping and <something ambiguous> is wildly off base - unless the telcos continue sabotaging the process by withholding the information. The Senate in the last draft I saw added another $200M.
The thought on the Senate side is essentially to recreate the Community Technology program Bush killed, providing access and education for those needing help. That’s fine by me, although unfortunately the results were disappointing after spending hundreds of millions. At least it will be put people to work.
About ten thousand people have access to a pretty good broadband map today, but none of them are in government or allowed to talk about it. Every sales clerk at Dell or Best Buy can do an immediate check about whether a customer can get broadband. The telcos and cablecos pay a nice commission if that’s added to the sale. You can easily confirm that for yourself. Go to http://www.broadbandnational.com/ and type in your address. They instantly check that against the prequal database at Verizon, AT&T, Time Warner, etc. All but the very smallest companies have prequal databases because they need it themselves. A map could be 95% done in a month according to the pros, and the rest filled in pretty quickly.
The only reason we didn’t get a map years ago is the carriers refuse to provide the data to the government, even under confidentiality. Verizon went to court to prevent Maryland getting the facts. In 2005, Kevin Martin asked a <DSL expert> how to get good data. “Ask the effers” was the reply, but it took four years for the FCC chairman to get some detailed answers. Few other countries would accept that stonewalling.
Instead, the telcos want hundreds of millions provided to organizations like “Connected Nation” where they have influence. Mapping, by CN or any of half a dozen professional outfits, would take less than 10% of the money. Or Verizon could just lend four experts and they’d have it done in three months if the carriers co-operate.
There’s a legitimate use for the $300M-500M to re-create “Community Technology Centers” providing training and access. Bush killed that program. Training and vocational education is mostly salaries, which directly translates into jobs. Some of the local programs did good work, others were just jobs on the dole. The general impression was the overall results were disappointing, but some experts disagree. It wouldn’t be the first place I’d spend stimulus money.
Instead, the telcos want the $350M for is “demand creation,” a huge bureaucracy in every state that would “promote broadband.” They would send “eCommunity Leadership Teams” and create “targeted awareness campaigns.” I don’t know where they expect to find tens of millions of people who don’t know what the internet is in 2009; even the families in South Bronx housing projects know what the Internet is and buy it for their kids if they can afford it. Decades of experiments and hundreds of millions spent around the world to persuade people to buy DSL has proven ineffective, whether community-based teams in Italy or the best campaigns of Madison Avenue. Price is the prime determinant, and recent data from both Verizon and AT&T make clear bringing the price down is the most effective way to get more people involved.
They have some completely bogus “research” that claims it would add $134B to the economy. Actually, if you look at the data rather than the conclusions, CN’s “demand-side” efforts are approximately useless. They note that over three years Kentucky added more subscribers than other parts of the country. They also report during that same period Kentucky’s availability went from 60% to 95%, a 35 point increase when the rest of the nation only added about ten points. Increased availability is a good thing, and they deserve credit for that (and for being courteous people I believe genuinely want to help poor kids.) But the numbers show increased availability explains all or most of the gain, not community by community sales teams. However, that conclusion also is meaningless, because they only have three datapoints. That’s not close to enough for statistical significance. They then take discredited “studies” paid for by the telcos and misuse them to come up with figures too good to be true and about as accurate as Bernie Madoff’s customer records. availhttp://www.connectednation.com/_documents/Connected_Nation_EIS_Study_Full_Report_02212008.PDF
Mefford and folk have been nice to me and I didn’t want to push this even though I had the facts last spring and factchecked with them at the time. But we’re talking $200M of public money here when my neighborhood soup kitchen often doesn’t have food for everyone on the line. By now, they should have either confirmed the work or pulled it. Instead, they and allies are using for a massive lobbying campaign, including at the U.S. Senate the day I’m writing this. Their original map of Kentucky was badly flawed, but reviewing the issues with them I was convinced they know how to do better if the telcos co-operate.
Besides the telco-paid advocates in D.C., they’ve found a strong ally: state commissioners who are drooling at the patronage jobs this will involve. NARUC didn’t have the courage to protect the open Internet after some telco lobbyist got involved, but they came out strong for this. I have no wisdom about how to keep poverty pimps out of this business, but real supervision needs to be implemented.
6) Auditing must be much larger. The FCC Inspector General recently reported nearly a $B in improper payments. A program organized this fast is likely to have even more problems. Good auditors find problems early. Bad auditors create useless paperwork. With jobs short in accounting these days, find good ones, and especially the managers. This should be one of the easiest changes to put in. Just show any opponent the FCC Inspector-General’s Report or the RUS Annual Report. They are horrifying. |
