The future of the Internet depends on its ability to deliver experiences. Things like “stamping out traffic management” or “promoting Net neutrality” are abstract issues that just poke at symptoms of the real problem, which is a lack of access bandwidth and quality of service (QOS). The only solution to that real problem is to get fiber to the home (FTTH) in every industrial nation on the planet. And the best way for that to happen is to get the governments involved.
Japan and Korea have far better Internet service than the U.S. The reason is because a mile of fiber passes a lot more demand dollars there. Korea and Japan have nine and twelve times the U.S. average of “demand density.” Some parts of the U.S. are nine to twelve times as dense as other parts. (Verizon has the best demand density, so it’s no surprise that it’s the only Regional Bell operating company [RBOC] committing to FTTH.) You can’t change demand density; no corporation with a profit motive (that’s every public company by definition) will deploy FTTH at a loss; and no abstract Net neutrality legislation is going to fix the problem.
What will fix it? Make the telcos into public utilities again? Aside from the fact that deregulation has never been successfully rolled back anywhere, there’s no assurance the “utility” will even deploy fiber, or that it will be affordable. Use the Universal Service Fund (USF) or its equivalent in other countries to subsidize FTTH? A USF subsidy hurts the middle class and poor because everyone pays USF charges. So, what’s left?
The only way to get universal FTTH is to make the bold decision to offer a 100 percent investment tax credit to all those who are willing to deploy FTTH. A tax credit of 100 percent means that any FTTH deployment cost could be simply written off against federal tax, dollar-for-dollar.
In effect, the government would be paying for the deployment of FTTH out of tax revenues, which means we’re paying for it out of our income taxes. Income tax is a progressive tax where the burden falls most on the wealthier taxpayers. And that’s where you’ll find high-tech employment -- the group that’s benefiting most from the boom the Internet has already created.
State and local governments can also get into the action by permitting FTTH infrastructure to be financed with tax-free bonds. All of this would turn FTTH from a huge cost to a huge benefit to businesses that deployed it, and FTTH would expand radically.
In fact, the issue might be keeping FTTH deployment from becoming too good a business. Therefore, we would need fast and objective standards to be set for minimum deployment features. That should be done through an independent industry group with representatives from the Internet community and the access providers, charged with quickly setting the standards for the FTTH infrastructure to be deployed. The second step is to require that all FTTH deployed under the tax credits be perpetually open to competitive access under technically viable requirements, and at a fair and present rate.
Access providers already deploying fiber benefit by having their costs reduced. For providers such as Comcast Corp. (Nasdaq: CMCSA, CMCSK) that say they must manage traffic to ensure the user experience, this offers a way of expanding the user experience instead. Public utilities that have been looking at low-capacity broadband over power lines could exploit their poles and rights of way with fiber to the home.
Any of these choices will expand the capacity and power of the Internet, all without destroying the business models of public companies like the RBOCs that have already invested in infrastructure. It would also help the economy by restoring the innovative drive that became a casualty of the tech bubble, but also gave us the best decade in modern history.
There is no question that the Internet is already a powerful public service, and one we can’t assume will be optimized if the disjointed forces of the free market have to somehow carve out profitable niches for all of the players involved. Access is the key to everything, but it’s hard to make it truly flexible and expandable enough to meet present and future needs. A tax-credit subsidy has worked for R&D in general, so let’s expand it to create the Internet of the future.
— Tom Nolle, software engineer and founder ofCIMI Corp.
I came across this very exciting article in the New York Times and i wonder if it wholeheartedly support what your were suggesting in your thinkernetter' s post: OPEC 2.0
Some in the blogosphere have simply label the professor's suggestions as being absurd!!
Hi Paul; thanks for keeping up on this issue! I've done some lecturing on regulatory policy on Australia and I'm generally familiar with the byplay on this particular initiative. It's similar in some ways to my proposal but it may not be similar enough. The Oz approach is to provide what is essentially a partial subsidy that in some ways operates like our universal services mandate but with a broader scope. As the article you reference makes clear, the subsidy isn't enough to really build out, which my suggestion of a 100% tax credit would support. A partial subsidy is a potentially useful approach under two conditions; the subsidy will make enough of a difference in financing to empower at least one player to invest, and the result of the deployment made under the subsidy is financially sound enough to be sustainable on its own once the initial investment is made. Australia has special challenges because it has very low demand density, so deployment is expensive. My model of market economics says that with density that low it's not optimal to have either competitive providers of access with their own physical facilities or to have resale competition from third parties. Either one lowers the rate of return on access so much that subsidies can't make up the difference. So my model would suggest that Australia's approach could end up creating a market model that wouldn't stand on its own and would have to be rescued later on. Where density is very high (Europe, Japan) the ROI on access is high enough that you can have competitive overbuild and wholesale-based competition and it doesn't kill the business model. Australia has one of the lowest densitities in the industrial world.
I do think it's interesting that some regulators are stepping up with at least a strategy to address broadband access needs; we still don't have that here!
I saw this article on the Australian government intiative to provide broadband for 98% of its citizens. It's similar to what your post was suggesting! What's your take on this initiative???
I don't accept things as "correct" because they are "extant". "Advertising paying for other things" is the preferred model by SOME people, not EVERYONE, and deserves to be Examined and Discussed.
People ignored hygiene until they learned otherwise. Comments about "everybody accepts" reflect a passive acceptance of things as they stand, and if my argument that the advertising-pays model is damaging is correct, then it's just something else to teach people past, that's all. People may not want to hear others telling them to "wash their hands", but after a while people will understand that that was good information having to rise into public consciousness - like using condoms.
I don't accept "monetized mentalities" - life is much more about life than money, and people need to see that other ways of organizing our economy can produce better qualities of life than what we have now. For me, the best evidence I have that the "advertising pays" model is bad for average Joe is that the more ambitious a corporation is, the more it's in favor of the model. Know them by their friends and habits. I already said I don't like advertising at all, and I'm not by any means the only one who feels that way. I don't see corporations ASKING US if we want ads on everything; and that's not Democracy - that's Totalitarianism.
My expectations have not been steamrolled by years of commercial propaganda - I still believe we can get rid of the commercial propaganda, and I am at least one person with that attitude. I suspect there are many more.
Here, I'm afraid that the masses have already voted. Television is ad-sponsored (except for premium channels that most don't take) and so is a lot of the Internet today. No matter what we think about ads or their effectiveness (I've done some studies in that area that show some astonishing lack of results for them) they're here to stay. People's notion of "free" is too established at this point.
"Unless people want to pay for online service beyond just paying for access, we have to presume ad funding for everything ..."
I have written elsewhere that the model, whereby things are offered for "free" because they are paid for by advertising, is invalid. This whole concept derives from the days of Radio, where the consumer could consume anonymously.
Of COURSE people will pay for online access - it is a SERVICE that they are CONSUMING. The very idea that people would expect to be given things for "free" flies in the face of the "moral foundations of our nation" as I was brought up to understand them. I do not know of any country where people expect each next service introduced to the public to be FREE, especially if (a) the service provides value to the consumer and (b) the service costs money to render. They tell me, if I want to ride a City bus, that I have to pay to do so, even though making the BUSES free would help fight global warming by taking people off the road. If they won't make USEFUL and NECESSARY things free, we shouldn't believe that anything else claimed to be "free" is really free. What is going on is a wealth transfer and someone definitely IS paying for the 'free' thing on the assumption that they can make more money through derivative processes. That's flimsy, silly, hollow and shallowly reasoned.
Paying for X with dollars advertising other things Y makes no genuine sense. Whether X is any good or not is now decoupled from dollars sent to X. You have broken a central chain of accountability. The example I have worn out is that I can advertise myself as the number one plumber on the Internet without even being competent; as long as dollars flow in based on my ads, I succeed.
I'd like to see people being brave, as follows: (1) You take control of the country back from the protofascists and stop wasting huge sums of tax dollars on foreign adventures and corporate giveaways, so that when we pay "a lot in taxes" we clearly see that "we get a lot in services", so that taxes begin to make sense again; and then (2) we pay for what we wish to consume, and disabuse ourselves of the FALSE NOTION that anything is in fact FREE. The next time you DEMAND that something be FREE TO YOU, ask yourself when YOUR LABOR will be FREE TO OTHERS. If the answer is"why would I do that?", that's your answer to why you shouldn't get anything for "free".
Finally, ADVERTISING SUCKS. I am thoroughly tired of being targeted every conscious moment of my day by someone who wants to distract me to try to snag me into purchasing something from them. My time is worth money: if you want my attention then try PAYING ME to pay attention to you. Otherwise: we (the public) will buy from you when WE NEED TO and WE will find YOU - we do not need to HEAR FROM YOU and SEE YOU every other moment begging us to do commerce with you.
Life is too short to have been made as stupid as commercialism-as-religion has made it, in the US and the world, and it's time to REJECT this lifestyle - chosen for us by others rich enough to command the media. We need a thoroughgoing change in the way our economic system works, so that commerce is forced to honestly represent the commdities and services provided. People who offer things for free are simply LYING as to the actual nature of the underlying transaction.
Seattle is introducing a bill to provide municipal FTTH; they are debating on whether to contarct for it with a private company or simply do it self-managed. I think there are a number of communities that are now looking at FTTH as a possible way to increase their attractiveness and competitiveness. The same, I think, holds for nations. The industrial revolution empowered countries who had labor, capital, and raw materials. I think you could argue that Internet access is the raw material of the information age.
At a state level, like your California example, any experience that could be provided (even just shaping legislation) would help by letting us see what models for subsidization are reasonable to voters. We're making progress; if a city or state had proposed to be in any way involved in the deployment of broadband ten years ago the voters would have rebelled. We see how important the Internet is today, and the lengths that citizens would go to be able to get high-bandwidth connections are expanding too.
With my thoughts dressed in purple today; i reflect on the day that the world sees the light. Future choices are sometimes radical. As a neuclear baby, i am awed at the second greatest invention of laser diodes and optical detectors. The fiber optical core was only the add on to make light move from a stright line. (waveguide makes rf microwaves do the same; and where would we be today without that)
Tom: Why we do not just go to Universal Fiber now , baffles me also. Is partial incremental performance in a fee for service model , what universal broadband has come down to. As a campaign issue, i find this , ( There is one catch. You need bandwidth to take advantage of these opportunities ).
The settlement issue, meaning an explicit way to divide revenue based on who participates in a service, has been a thorny one in the industry. Back in 1997 I worked on a draft RFC called "brokered private peering" that tried to make explicit settlement part of at least premium Internet relationships. I've also been active in the IPsphere Forum, which has been working on pan-provider settled IP services. They may help a lot with the health of the current industry, but I don't know if they can transform it at the FTTH level because I don't know that there's enough money on the table.
Unless people want to pay for online service beyond just paying for access, we have to presume ad funding for everything, and I don't know that's enough to build out FTTH for everyone without some form of government support and subsidy. I think the municipal route may well be workable in some areas, but as I sad a bit back in this stream, there are enormous differences in demand density even within the US and so a municipal solution might work in Basking Ridge but not in Cody WY.
I don't think that the ability to correctly make future choices presents a linear degree of difficult; sometimes it's easy and sometimes hard. The past decisions with copper were certainly "wrong" in terms of longevity but at the time the short-term cost couldn't be offset by the long-term benefit. Are we in that same place today? There was no significant fiber deployed 20 years ago and not much even 10 years ago except for transport. Today we DO have FTTH, we just don't have it everywhere. Should that be a campaign issue? We have universal voice legislation today and most people think we'll have "universal broadband". Eventually, universal fiber? It just seems like baby steps to me.
Sorry if this overlaps other comments, but take a look at
http://communityfiber.org. That is a sketch of a model for rebuilding
networks that WE THE PEOPLE own, from the ground up. If you wait for
the telcos, we'll leave a flower at your grave. I want my GIGABIT
MUNICIPAL FIBER CONNECTION TO MY HOUSE NOW.
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