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May 7, 2018

Overbuilding, aka Competition, is the American Way

When I was a college and graduate student, I studied the Soviet Union – its history, military, culture, and economic system. I studied Russian language at language immersion programs here and in the Soviet Union. During the beginning of end of the Cold War, when Gorbachev first became president, I lived in the Soviet Union. I wrote my masters thesis on Gorbachev’s economic reforms, anticipating the ways they would fail. And, during the glorious end to the Cold War, my job took me to places that had been caught up in the decades long global struggle – to Berlin in the weeks when the Berlin Wall came down, to Warsaw during the Solidarity movement’s rise to power, to Nicaragua for the peaceful election of the Chamorro government, and to Cambodia and Vietnam for the start of new relations between the U.S. and southeast Asia. I never thought the end of the Cold War meant the end of history, as Francis Fukuyama once suggested, but I did think it was the end to a debate about the ability of central economic planning to improve on the creativity and drive of capitalist economic systems.

To those of us who grew up in the West and lived for any period of time in a communist country, the failures of central economic planning were at the starkest whenever we walked into a supermarket and faced empty shelves or a single brand of goods. Arguably, you don’t need the choice of several hundred types of cereals in a supermarket aisle. But we all understood the contrast. We all understood what one economic system produced and what another failed to produce: choice and abundance. And we understood that abundance was a consequence of choice.

What do my reminiscences have to do with telecommunications? When I read the comments of those who warn against “overbuilding” communications networks, I hear echoes of the central planners of long ago. Arguments that one network is more efficient and competition doesn’t work in certain industries or in certain parts of the country. For a hundred years, Congress and government regulators have protected and funded monopoly communications networks in rural areas with the aim of ensuring universal service. In the past decade alone, the FCC has committed tens of billions of public dollars to telephone companies to support their networks. If you live in rural America, how is choice and abundance in broadband working out for you? Not so good.

When the government funds one type of network by one type of company without employing any competitive mechanism for determining the right company or technology, what are the odds that the government regulator makes all the right decisions? Again, not so good.

My perspective, borne of real world experience, is that the government telecommunications programs themselves have retarded the necessary investment in rural America. I don’t question whether some public funding is necessary in high cost, rural areas. I question the funding mechanisms and the rationale that “overbuilding” is somehow anathema to good policy and good outcomes.

Overbuilding is not the problem in rural America, it is the solution.

The following is a non-comprehensive list of rural broadband overbuilders that have announced over the past two years plans to build rural networks:

  1. AT&T. Announced Project AirGig to send data over powerlines.
  2. Google. Announced Project Loon to use balloons traveling at the edge of space to bring internet access to rural areas.
  3. Facebook. Announced conducted tests to use drones to deliver rural broadband.
  4. Microsoft. Announced trials to use TV whitespaces for rural broadband.
  5. SpaceX/OneWeb. Announced plans to deploy thousands of low-earth orbiting satellites to deliver internet access to rural areas.
  6. New T-Mobile. Announced its intention of 5G for all, extending 5G to rural areas.
  7. Rural Electric Cooperatives. Dozens of fiber-to-the-home networks under construction.

Which of these initiatives should the government favor? If your answer is the government should not favor any one company or technology, then perhaps you also agree that the government shouldn’t favor telephone companies with their copper networks.

This year, the FCC is moving toward competition for public funds with the CAF II auction, and then the Mobility Fund II auction. Those auctions comprise $198 million and $453 million out of the $4.5 billion annual Connect America Fund. What of the other 85% of the public’s money?

As a small first step, I propose that anywhere one of the overbuilders has already overbuilt a telephone company’s network without any public funding, the government should cease its funding in that area. To make the government policy easy to execute, I propose that where 100% of the households in a census block have access to Gigabit service by a company that is not receiving a subsidy in that area, then the government shouldn’t fund any company in that area. That simple policy change would save the public hundreds of millions of dollars, money that could be used where it is needed.

As a second small step, I propose that all future funding follow individual consumer decisions. The telephone companies can continue to get their legacy support, except where a household chooses another carrier with a minimum of 100 Mbps service. In that case, the overbuilder should receive support that is equal to the funding being provided on a per household basis to the telephone company. Such a program should be limited in time, no more than a decade, in order to encourage overbuilders to move quickly and incumbents to improve their networks.

In short, let’s put economic decisions in the hands of people who are affected by those government decisions. Let individual rural consumers direct public spending by their individual choices.

I was a witness to history. To people rising up, people knocking down walls with sledgehammers, people gathering in public squares to demand a different future, people standing at daybreak in long lines to vote, people facing down authoritarian regimes. Much later in my career, when I worked at the FCC, I used to say that people shouldn’t wait for government to save them. I encouraged overbuilding then, as I do now. Change the arc of history in your rural community: be an overbuilder.

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About Jonathan Chambers
Jonathan has worked for over thirty years at start-up telecommunications companies and in the U.S. Government. Prior to joining Conexon, Jonathan served as Chief of the Office of Strategic Planning for the Federal Communications Commission. Jonathan was part of the senior leadership at the FCC that reformed $12 billion in annual federal spending, including the rural and high cost fund, e-rate, telecommunications relay services and the lifeline programs. For the majority of his career, Jonathan has worked with companies building broadband networks. Jonathan left the FCC to help electric cooperatives bring fiber-to-the-home (FTTH) broadband to rural areas throughout the country.

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