Google and the FCCFriday, July 24, 2009
Imagine my surprise! The Federal Communications Commission (FCC) has asked for input from all of us in crafting its broadband report, so Google has decided to offer its assistance. The report is due by February 2010 as a part of the Economic Recovery and Reinvestment Act of 2009. Of course, Google is not without its own motives and it is important to understand that primary among these is to get more eyeballs viewing its search and other offerings to keep its ad revenue flowing.
You might recall that Google was instrumental in convincing the “old” FCC to include open access provisions for the 700-MHz C Block prior to the auction. It bid the minimum required amount at auction to ensure that the open access requirements would stay in, and then left the bidders table. Google has also been actively pushing Wi-Fi, and its most recent foray into wireless was as one of the strongest supporters of TV White Space being designated as unlicensed spectrum.
The FCC did make TV White Space available for unlicensed wireless usage, but put in some restrictions that make it difficult to deploy systems in this spectrum in urban areas. So now Google has come forward with its offer to help the FCC write the broadband plan.
Google has teamed up with the New America Foundation to launch a Google Moderator page that invites visitors to submit and vote on ideas they believe should be included in the plan. Then it will submit the most popular and most innovative ideas to the FCC’s official record for consideration. The site is off to a very slow start, and the comments posted so far are from people who think access to the Internet should be free, that we are being ripped off by the telcos, cable companies, and wireless operators, and the spectrum should be available to anyone who wants to use it.
Google’s own stated ideas include fiber deployment to every library, school, community healthcare center, and public housing facility in the United States, incentives for providers to install multiple lines of fiber as new networks are rolled out, and a re-write of the TV White Space Bill to reduce the number of restrictions in place to protect consumers’ TV sets from interference.
Google is not magnanimous, but then again, neither are the network operators or others who are in business to make money. However, in the case of Google, I think the company should be required to make a full disclosure of the amount of dark (unused) fiber it owns all over the nation and tell us its plans for how this fiber will come into play in the future.
Google is also asking for less restrictions for TV White Space unlicensed spectrum. These rules were put in place to protect consumers because TV receivers are not designed to ward off interference. Due to the high potential for interference in urban and suburban areas if high-power devices were to be permitted to run at the power levels and on the number of channels Google wants authorized, viewers’ TV screens could be filled with snow instead of pictures.
Google has hired some outstanding talent from both the wired and wireless industries but is not listening to them. Its management negates the issues of interference, and the CEO, at least, claims that wireless bandwidth is not a scarce resource. Rather, they believe that by bringing more wireless access closer to those who want it, we can have all the bandwidth we will ever need. (Does Google plan to provide back-end services for a zillion Femtocells with all that dark fiber?)
Google is a big company with plenty of access to Washington, D.C. and those inside the beltway. Several people inside the company have quietly expressed to me that the reason Google is pushing to be involved in wireless and broadband services is that it has not received a very warm reception from the wireless network operators and has decided it needs to force the issues at the FCC and in congress. Apparently Google is making some headway there. It would be better for all concerned if the Internet and wireless folks spent some time talking to each other and tried to understand each other’s position.
Instead, Google, with its relationship with the New America Foundation, is gathering input from people who don’t understand today’s economics and certainly do not understand the dynamics of competition or the fact that we pay some of the lowest prices in the world for wireless voice and data. This is the crowd that believes we are being ripped off by the network operators, all spectrum should be unlicensed and unregulated, and cognitive and/or software-defined radios will make wireless plentiful and free for all who want to use it.
I am repeating myself here, but most of the people who will sign onto the Google site and share their suggestions believe that our highway system is free, so access to the Internet should be free. But thinking people understand that we pay for our highway systems every time we pay vehicle registration fees, buy gas, pay tolls, pay property taxes, or pay a variety of other taxes. A percentage of all of these levees pays for our roads on a federal, state, and local basis. Paying fees to access the Internet is not a new idea, it simply follows a model that has been in place for scores of years. In this case it is not government levees paying to provide the Internet, it is network operators paying with the fees they collect.
In a recent editorial, the New York Times stated that our wireless phone bills run an average of $506 per person per year and that in Europe bills run from $200 to $300. What the NYT neglected to mention is that here we talk an average of 842 minutes per person per month and Europeans only talk an average of 248 minutes per month. Nor did the NYT mention that the revenue per minute for European wireless operators is in the $0.14 to $0.20 range and we pay an average of only $0.06 per minute (source: Merrill Lynch Q3-08). Still, there is a growing trend to categorize wireless operators as bad guys for taking too much of our money.
The following day, another piece in the same paper took wireless network operators to task for charging from $0.20 per minute to $1.50 per minute for an international phone call while with Skype or another service the calls are free or $0.02 per minute.
The problem with this piece is that the NYT did not point out that Skype is using the Internet, which is not a mission- critical network, it doesn’t pay interconnect fees, it didn’t pay to build a network, and it doesn’t contribute to the network’s monthly operating costs—it is riding on other people’s investments. With wired and wireless networks, there must be a decent return on investment or the networks will deteriorate over time and we all will suffer the consequences.
There are other parts of the world where services are better than in the United States, but only where wired and wireless network operators started out as being government-owned. They had very few budget constraints and no issues with obtaining permits to build out sites. Wireless systems came after wired systems and many countries set out to match the wired coverage area with wireless. In the United States, we had AT&T—a monopoly to be sure—but it was not run by the government. Even so, AT&T built its wired network to a 5-9s (99.999%) level of reliability when it didn’t have to and built in redundancy to give us a world class phone system at fairly reasonable prices.
Electricity and telephone services in rural America were government subsidized (and still are to some extent) and companies were required to provide services to all who asked for them. In today’s economic environment, without government support, wired and wireless operators are getting beaten up because they only cover 96% of the U.S. population with voice services and 94% with data services.
As a result of lobbying by Google and others, there is a misconception that creating ever more competition in the wireless marketplace will result in lower prices, better coverage, and coverage where there is none today. This is not based on any reality. Some within the government believe we need more nationwide wireless systems in the United States, but history and the market indicate otherwise. With the possible exception of Sprint, all of our nationwide wireless networks were put together piecemeal over time, and the cost to build the networks was spread out over many years. Introducing one or more new nationwide network operators means they will have to start at ground zero and build out a competitive network. Their network will cost them many billions of dollars, which they will have to raise from investors and by selling stock. Stockholders and investors will demand that they provide a decent return on that investment in a short period of time—that is the way our free market economy works.
Perhaps Google can afford to put money into a network without seeing a return—which it seems to be doing with UTube. But putting $millions into an Internet company is not the same as building a world class network and showing a decent return, especially if you don’t charge for the services, believing that ad revenue will pay the way. It simply does not compute.
In my most recent filing with the FCC, I made a case for the concept that its broadband report should not focus on technology—we have plenty of technology and more is on the way. Rather, we should concentrate on the two sets of economics that must be addressed before we can achieve nationwide broadband. The first is the economics for rural America where we need to make building out services affordable for network operators, enable them to afford the monthly upkeep of the networks, and at the same time provide a return to their investors. The second set of economics involves many urban and suburban people who have broadband services available but cannot afford them and the devices that are needed to use them. When we address both of these issues, we will solve our broadband coverage issues.
Google is entitled to play in a free market system and make money doing so, as should everyone else. However, if no one can make money providing communications services—wired, fiber, cable, or wireless—there is no incentive to build out new networks or add capacity. The result would be nationwide communications that were the envy of every nation being reduced to a communications system that barely takes care of our needs and may not be there when we really need it. Google has the right to push for whatever it can get as does everyone else. I only hope Washington can balance all of the issues and not let any one set of players dictate what should happen as it did prior to the dot-com bomb. No one set of players has all of the answers.
Andrew M. Seybold