Giving Wireless Broadband a Boost

By Brad

Yesterday, the FCC took a big step toward boosting the power of wireless broadband. Amy Schatz at the Wall Street Journal reports:

The Federal Communications Commission Thursday approved a plan to open vacant TV channels for wireless broadband, a win for high-technology companies that have long sought to use the airwaves for new services.

The FCC’s board unanimously reaffirmed a 2008 decision to open up the broadcast airwaves and clarified some technical details about how companies will be able to use them. Google Inc., Microsoft Corp. and Dell Inc. are among the companies that have pushed the FCC to open up the TV airwaves, and they have already been testing systems for using them.

FCC Chairman Julius Gena chowski said the move was important and would offer “unique opportunities for innovators and entrepreneurs.”

At Bloomberg, Todd Shields breaks down what this move could mean for the economy:

White-space applications may generate $3.9 billion to $7.3 billion in economic value each year, according to a September 2009 study funded by Microsoft and written by Richard Thanki, a London-based analyst with Perspective Associates.

Members of the Business Community Asks the FCC to Back Away

By Bruce Mehlman

Grant Gross from PC World reports:

Representatives of the U.S. Chamber of Commerce, the National Association of Manufacturers (NAM) and the Telecommunications Industry Association (TIA) questioned the need for the FCC to pass new rules prohibiting broadband providers from selectively blocking Web traffic. New regulations could slow down investment that broadband providers make in their networks, said Jason Goldman, counsel for telecommunications and e-commerce at the Chamber.

“The broadband market is flourishing,” Goldman said during a press conference. “Broadband service providers are investing tens of billions of dollars every year to upgrade their networks. Broadband-enabled devices and applications are being released daily.”

Broadband Fact of the Week

By IIA

A recent study shows that employment levels within Internet companies are up 13 percent since the recession officially started in December 2007.

— Mandel, Michael, “The Coming Communications Boom?” Progressive Policy Institute, April 2010. Web. 28 Jul 2010.

Learn more facts in our ever-expanding Broadband Fact Book.

Guest Blog: Mike Jude

By IIA

Stratecast has released a new study entitled “Net Neutrality & Broadband Access: Hindrance or Help?” which examines the possible effect proposed regulations on broadband providers would have on investment, broadband deployment, and the National Broadband Plan. We’ve asked Mike Jude, Ph.D. of Stratecast to distill some of the study’s findings. — IIA.

Following the Federal Communication Commission’s announcement that it was pursuing reclassification of broadband service until Title II, network operators warned that, even with promises from the FCC about forbearance, an uncertainty of regulation can severely hurt investment.

Our findings back up network operator concerns. For the most important elements influencing investment decisions (such as ARPU [average revenue per user], CAPEX, OPEX, and innovation), risk is the enemy of investment since it inserts uncertainty into the expectations of revenue and return of investment. Put another way, network operators decide how much to invest based on the outlook for long term return. As we note in the study:

ARPU growth is impacted by net neutrality since one can make the assumption that, to the extent that net neutrality impacts the ability of an operator to offer competitive services, it could reduce the revenue per user. The model predicts that such erosion can be significant…ARPU— the amount that an operator can generate per subscriber in the presence of net neutrality — can be as much as $80 per month less at the limits of this projection. Since this amount is almost exclusively derived from premium services, above the access rate, the impact on the operator is obvious — a dubious investment.

Obviously, this loss will have a major impact on network operator revenues — as much as $4-$5 billion per year, as soon as next year. The ripple effect of this loss would also effect the U.S. economy through the loss or prevention of up to 70,000 jobs by the end of 2011.

These are just some of our findings. Overall, we see the potential for great harm in imposing broadband reclassification and net neutrality.

Mike Jude, Ph.D.
Program Manager — Consumer Communications Services, Stratecast

IIA Web Chat: Broadband Regulations and the Economy

By IIA

IIA Co-Chairman Bruce Mehlman and IIA Broadband Ambassador Joseph P. Fuhr, Professor of Economics at Widener University and Senior Fellow at the American Consumer Institute, are discussing the implications of broadband policy on jobs, investment and economic recovery.

Join the discussion.

Required Reading

By Bruce Mehlman

From a new study conducted by the Progressive Policy Institute entitled The Coming Communications Boom? Jobs, Innovation, and Countercyclical Regulatory Policy: 

There’s little doubt that a permissive regulatory regime for derivatives and securitization helped foster the housing boom, creating millions of jobs in construction and finance. But it also set the stage for the financial crisis that eventually sent unemployment soaring. Right now regulators seems intent on tightening the regulatory regime on the communications sector, despite it being one of the few growth sectors in the economy, and despite the fact that communications-related industries were completely blameless in the housing boom and bust. The Federal Communications Commission (FCC) is considering imposing tighter regulations on broadband, bringing it under the same common carrier rules that govern older phone networks. That would be part of a move towards net neutrality, a policy that would require broadband providers to follow rules about what kind of service and products they could offer. There are different approaches to net neutrality, but the strictest version would be like requiring airlines to sell all tickets to a particular destination at the same price, no matter what the time of day or when the ticket was bought.

The debate over net neutrality is intense. But whether or not you think that such a move is a good idea, it seems unlikely that such regulations would boost investment or employment in the telecom industry. The experience of the airline industry suggests that differentiated pricing and service is an essential part of keeping a high-fixed-cost industry running.

The full study — required reading for anyone interested in the current Internet regulations debate — is available at the Progressive Policy Institute’s website.

Hanging on in China

By Brad

The Wall Street Journal reports that Google, which has been scuffling with the government of China lately, had its licensed renewed by the government last Friday. The renewal allows the search giant to keep its Chinese web address, but the government can still revoke it whenever it sees fit.

The Cost of Crashing

By Brad

On Tuesday, Amazon.com experienced a major outage for most of the day, prompting CNet to look at the cost of the outage:

At an annual revenue of nearly $27 billion, Amazon faces a potential loss of an average of $51,400 a minute when it’s site is offline. Amazon shares closed down 7.8 percent, a sharper fall than the Nasdaq index.

Broadband Fact of the Week

By IIA

For every 3 million new broadband lines deployed, nearly 300,000 economy-wide jobs are created.

— “Where Jobs Come From, The Role of Innovation, Investment, and Infrastructure in Economic and Job Growth,” Jessica Milano, February 2010.

More facts about broadband.

Broadband Fact of the Week

By IIA

Investments in America’s digital infrastructure are likely to create or retain 1 million to 2.5 million jobs in the near term.

— BB4US.net, ‘‘Report of the US Broadband Coalition on a National Broadband Strategy,’‘? US Broadband Coalition. September 24, 2009

More facts about broadband.

Broadband on the Rise (Again)

By Brad

After relatively flat broadband growth in 2009, a new report from Leichtman Research finds that in the first quarter of 2010 demand for broadband was once again increasing. From GigaOm:

The top 19 cable broadband and telephone companies added a net total of 1.4 million broadband subscribers in the first three months of the year vs. 890,000 new subscribers in the fourth quarter of 2009.

According to the report, the top cable companies now have more than 40 million subscribers, while phone companies have over 32 million.

The Cost of Net Neutrality

By Bruce Mehlman

Research firm Frost & Sullivan has released a new report, “Net Neutrality: Impact on Carrier Investment and Economic Growth,” which examines the possible effect new regulations would have on consumers, the economy, and the FCC’s National Broadband Plan. From the report (which we’ve posted to our site):

After interviews with several carriers as well as several consumer advocacy organizations, we determined that net neutrality was likely to impact the following variables:

• Innovation: Net neutrality impacts operator innovation by either providing incentives to develop products and services or to discourage those activities. Based on primary research conducted by this author, the assumption is that the more confusion or restrictions that are placed on an organization, the less likely it is to be creative and, by extension, innovative.

• Prospective ARPU: Average revenue per user is a statement of the expectation that particular consumers, both individuals and commercial users, will generate a particular amount of revenue over time. The important point here is not whether the average user will actually generate such revenue, but whether the operator expects the user to do so. It is the expectation of return that motivates an investor to invest.

• Non-access Service Revenue: Anything likely to discourage consumers or commercial entities, such as content providers, to subscribe to an operator’s service offerings is likely to decrease the total amount of non-access related revenue that can be generated.

• OPEX: Operational expense is the overhead required to deploy, manage and maintain networks. Net neutrality, by potentially increasing the overhead associated with ensuring regulatory compliance or by reducing the efficiency of managing networks could increase OPEX.

• CAPEX: Capital expense is the direct cost of deploying networks. In an environment where the revenues associated with services are denied or reduced for operators, CAPEX could be expected to decrease. Contrariwise, if QoS approaches are denied operators, CAPEX could increase as operators overbuild to address traffic growth.

Check out the full report, which should raise a major red flag for the excellent broadband team at the Federal Communications Commission. Rather than getting distracted by divisive new regulations with significant economic risks to consumers, the Commission should drive full speed ahead on those aspects of its Plan more surely focused on broadband adoption and deployment.

Economy Down, Internet Up

By Brad

New research from TeleGeography finds that even in a deep global recession, Internet use is growing:

New data from TeleGeography’s Global Bandwidth Research Service show that international network operators have weathered the recession surprisingly well. International bandwidth usage increased 60% in 2009, in line with the past two years, and well ahead of the trend of 2002-2006. Growth has been particularly rapid in the Middle East, Africa and Latin America. However, capacity requirements to seemingly mature markets, such as Europe and the US, have also grown at a compounded annual rate of more than 50% since 2002.

Tweeting for Advertising Dollars

By Brad

With somewhere around 50 million “tweets” a day, Twitter definitely has a social impact. Up until now, though, the service has ignored chances to monetize all its activity. That’s about to change. From the official Twitter blog:

We hope you’ll share in our enthusiasm as today we unveil a simple service we’re calling Promoted Tweets. It’s non-traditional, it’s easy, and it makes a ton of sense for Twitter. Our COO Dick Costolo will be talking about this much anticipated offering in detail today at the AdAge Digital conference. Tomorrow at Chirp, both Dick and our fearless leader Evan Williams will further discuss this program and what it means for the Twitter ecosystem.

What exactly are “Promoted Tweets”?

You will start to see Tweets promoted by our partner advertisers called out at the top of some Twitter.com search results pages. We strongly believe that Promoted Tweets should be useful to you. We’ll attempt to measure whether the Tweets resonate with users and stop showing Promoted Tweets that don’t resonate. Promoted Tweets will be clearly labeled as “promoted” when an advertiser is paying, but in every other respect they will first exist as regular Tweets and will be organically sent to the timelines of those who follow a brand. Promoted Tweets will also retain all the functionality of a regular Tweet including replying, Retweeting, and favoriting. Only one Promoted Tweet will be displayed on the search results page.

As for how this change is going down with Twitter’s users, according to the site Twitter Sentiment, reaction so far is mixed.

Keeping the Economy Growing

By Bruce Mehlman

At Real Clear Markets, IIA Broadband Ambassador Bret Swanson examines the effect new regulations on the Internet could have on innovation and investment:

The U.S. began the 2000’s with fewer than five million residential broadband lines and zero mobile broadband. We begin the new decade with 71 million residential lines and 300 million portable and mobile broadband devices. In all, consumer bandwidth grew almost 15,000%.

Even a thriving Internet, however, cannot escape Washington’s eager eye. As the Federal Communications Commission contemplates new “network neutrality” regulation and even a return to “Title II” telephone regulation, we have to wonder where growth will come from in the 2010’s.

Four Encouraging Things About the National Broadband Plan

By Brad

At the Huffington Post, IIA Broadband Ambassador Navarrow Wright digs into the FCC’s National Broadband Plan and highlights four points he finds encouraging:

[T]his plan has a real-world focus. Probably the best parts of the report deal with the specific ways broadband will improve our lives. The plan has clear, almost futuristic detail on what broadband means for us. Start with jobs and economic growth - probably the single most important issue in the country now. Today’s entrepreneurs can’t grow an effective business and generate jobs without high-speed Internet access, which offers low barriers to entry. But the plan also covers online education to help the unemployed or underemployed, improved energy efficiency and better healthcare at less cost.

On that last point, a nursing home can cost $200 a day. But a wireless health monitoring system for someone living independently costs half that much per month. Do the math.

Read Navarrow Wright’s full op-ed at Huffington Post.

Broadband Fact of the Week

By IIA

Communities with new access to broadband experienced 6.4 percent higher employment growth, on average, than they did before getting broadband.

“Where Jobs Come From, The Role of Innovation, Investment, and Infrastructure in Economic and Job Growth.” By Jessica Milano, February 2010.

More facts about broadband.

Broadband Fact of the Week

By IIA

According to Christopher Guttman-McCabe, CTIA’s Vice President of Regulatory Affairs, the wireless industry directly employs 268,000 people with jobs that pay 50 percent higher than the national average of wages in similar categories. Carriers are on track to continue to invest this year and next with their average capital investments reaching $22.8 billion a year.

Cecilia Kang, “Wireless Lobbyists Step Up Defensive Against Net Neutrality,” Washington Post. September 28, 2009.

More facts about broadband.

The Chilling Effect of Net Neutrality

By Bruce Mehlman

At the Huffington Post, Digital Society Fellow (and IIA Broadband Ambassador) Bret Swanson writes about the negative effect proposed net neutrality regulations would have on jobs and the economy:

Supporters might argue Net Neutrality will protect consumer access to the Internet and promote long-term innovation. These are crucially important goals. But I think they are wrong on these policy virtues as well. I’ve made the case elsewhere that Net Neutrality could have prohibited important business and technical innovations, from the exclusive handset arrangement that spawned the iPhone to the content delivery networks (CDNs) that enabled YouTube.

Regardless of one?s view of long-term effects, however, there is little chance Net Neutrality regulations could improve the near-term jobs picture. There is, on the other hand, a substantial possibility for harm. Net Neutrality could substantially reduce the willingness of service providers to invest in new wired and wireless networks. And it could do so immediately. Any capital expenditure reductions would directly affect tens of thousands of workers who build and maintain these networks. Capex reductions would also ripple through the whole network equipment and software value chain, starting with large companies like Cisco, Juniper, Corning, and Qualcomm; then damaging the prospects of hundreds of smaller suppliers in the high-end semiconductor and software sectors.

For more, check out Swanson’s report for Entropy Economics on net neutrality and jobs.

IIA Video: Marcia Thomas-Brown

By IIA

Marcia Thomas-Brown, Program Manager for the National Health IT Collaborative for the Underserved, discusses the economic benefits of broadband in the field of health care.