What Do Broadband Stimulus Decisions Signal about Future Broadband & Net Neutrality Policy?

July 8, 2009

What do the Administration’s new “NOFA” guidelines, which implement the $7.2b broadband stimulus package, tell us about the trajectory for broadband and net neutrality policy going forward?

  • If one listened to just the public comments of net neutrality proponents one would miss a lot of important substance and clues about where broadband and net neutrality policy may be going, given that these new grant guidelines/conditions are the first major official broadband guidance stemming from the new Congress and the new Administration.

What do we know now that we didn’t know before the release of the NOFA guidelines?

I. The Administration implicitly rejected extreme net neutrality.

The grant conditions strongly rejected the extreme net neutrality position of the tech elitists: (FreePress, Save the Internet and the Open Internet Coalition) that any bit interference is de facto discrimination. The Administration substantially limited what could possibly constitute Internet discrimination by substantially expanding the number of exceptions to the FCC’s Broadband Policy Statement as it applies to these broadband grants.

  • All these requirements shall be subject to the needs of law enforcement and reasonable network management.” p.29
    • The FCC Broadband Policy Statement only says “subject to reasonable network management.” The addition of “the needs of law enforcement” language is a major additional broad exemption that will particularly pain net neutrality proponents because, it allows for: stronger IP enforcement; law enforcement monitoring of network traffic; and stronger private/public cybersecurity cooperation.
  • Thus, awardees may employ generally accepted technical measures to provide acceptable service levels to all customers, such as caching and application-neutral bandwidth allocation, as well as measures to address spam, denial of service attacks, illegal content and other harmful activities.” p.29
    • This could be viewed as a dramatically expanded and broader definition of “reasonable network management” in the FCC Broadband Policy Statement — beyond just quality-of-service — to include a wide swath of smart network protections for consumers against the very broad threat of “harmful activities.”

II. The Administration explicitly rejected a one-tier, “dumb-pipe” Internet.

  • In addition to providing the required connection to the Internet, awardees may offer managed services, such as telemedicine, public safety communications, and distance learning, which use private network connections for enhanced quality-of-service, rather than traversing the public Internet.” p.29-30
    • The concept of “managed services” and private networks rather than public common carrier networks — is an anathema to net neutrality proponents who have long maintained that any tiering or prioritization of traffic is unfair, discrimination, and an infringement of free speech — even if tiering or prioritization is for accepted public purposes like telemedicine, public safety or education.
    • The Administration’s explicit endorsement of “managed services” recognizes the need for, and value of, smart network innovation.
    • It also implicitly recognizes that innovation does not occur exclusively at “the edge” or only with application providers.

III. The Administration implicitly rejected calls for an all-fiber network.

  • Much of the vision behind net neutrality proponents is that if there only was enough bandwidth… there would be no need for any bit interference or network management of any kind.
  • Hence, they strongly advocate that the government mandate construction of a national fiber network with public resources like the broadband stimulus money.
  • The Administration explicitly endorsed technology-neutrality in the guidelines, i.e. not picking technology winners and losers.
    • The standards chosen are technologically neutral and appropriate for the widest range of applications, because the definition of reasonable network management may differ based on the technology used and other dimensions of the project. p.118
  • The Administration obviously recognized the economics of scarcity of broadband stimulus funds and that fiber-to-the-cabin/igloo would be prohibitively expensive.
    • If advocates of a more regulated-utility approach to broadband hoped the $7.2b broadband stimulus money was a “down payment” for a publicly-funded national fiber network, they were clearly disappointed.
    • The NOFA guidelines affirm technology neutrality and recognize that diverse geographic challenges, densities, distances and many other factors, demand the right technology for the right circumstances.
    • One size broadband does not fit the wide diversity of the entire United States.

IV. The Administration explicitly rejected calls for mandating grandiose speed targets.

  • After major pressure to set very high broadband speed requirements for the country, the Administration was very practical, focusing on the core task at hand, maximizing that everyone possible get the FCC-defined broadband speed of at least 768 kbs downstream and 200 kbs upstream. p.18
  • The Administration stayed focused on the core and practical goal of getting as many Americans broadband access soonest, rather than trying to set broadband bragging rights internationally, which could perversely delay getting broadband access to all Americans soonest.
  • In deciding to use the FCC speed standard, the Administration implicitly recognized that choosing any higher speed level arbitrarily could exclude different technologies, lessening the opportunities to reach the most Americans soonest with scarce resources.

V. The Administration favored facilities-based competition/investment over artificial resale competition.

There were several ways the Adminstration showed respect for promoting facilities-based broadband competition in drafting the guidelines/conditions for broadband grant money.

  • In rejecting net neutrality proponents’ calls for construction of super-fast fiber networks, the Administration appreciated that competition could be seriously harmed by arbitrarily defining capable competitors off the competitive playing field and by discouraging private companies from investing.
    • Moreover, if the Administration had set arbitrary, difficult-to-meet speed and technology parameters, it would have sent the signal to markets that the government essentially was interested in picking technology and market winners and losers, and not interested in promoting facilities-based broadband competition/investment wherever it is economically viable.
  • There also appears to be a strong preference for focusing limited Federal funds on “unserved” rather than on “under-served areas.”
    • This also shows respect for promoting facilities-based broadband competition in that in stays true to the core goal of getting the most Americans broadband rather than subsidizing new competitors in under-served areas.
    • By implicitly prioritizing unserved areas over under-served areas, and by requiring that grant applicants show the network can’t be built without Federal resources, the Administration showed reasonable management of scarce resources.
  • Even with these shows of respect for promoting facilities-based broadband competition, I will be surprised if any large publicly-traded broadband provider volunteers to be subject to these grant NOFA conditions.
    • While these guidelines are voluntary, and while the conditions will not apply “to any existing network arrangements,” p.30, the reality is that it is inefficient and burdensome for providers to operate under separate and different network conditions.
      • Moreover, these grants are trying to encourage the building of broadband facilities in unserved areas that by definition are not currently economic.
      • Publicly-traded companies have an obligation to their shareholders to invest where they can earn a return on their investment.
      • The rules as written are also sufficiently ambiguous and uncertain about whether the government could become involved eventually in regulating rates of return, as to discourage major publicly-traded companies from using these Federal funds.

It is telling that the New America Foundation, a big proponent of the extreme net neutrality agenda and public broadband networks, complained to the Administration in a new white paper (p.10-11) this week, that the guidelines effectively discouraged government subsidization of competition in under-served markets.

In closing, the Administration’s NOFA guidelines are significant and noteworthy for what they did not do.

  • Think about the implications of these decisions on the trajectory for broadband policy and net neutrality going forward.
  • If the Administration was unwilling to mandate: extreme net neutrality; a dumb-pipe, fiber technology, and super fast speeds for unserved markets, which by definition have monopoly characteristics…
    • …it seems less likely that the Administration’s FCC national broadband plan, for the 90+% part of the market that is competitive and high-performing, would go in the exact opposite direction.
      • In other words, if unserved markets with no provider or competitor did not warrant mandated: extreme net neutrality, a dumb pipe, fiber technology, or super-fast speed requirements, on what rational and legal basis would it be warranted in competitive markets?

While these broadband guidelines and grant conditions are not industry rules or policy, they do reflect decisions and trade-offs that strongly suggest that the Administration is not interested in implementing the extreme net neutrality/public broadband infrastructure agenda.

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