Spectrum and economic policy
During yesterday's Ofcom-immersion, it was clear to me that Ed Richards wasn't interested in having some form of government-internet access-involvement story unfold in his country.
Ken Zita of Network Dynamics (who was just terrific) then got up and pointed out that in Asia they are unafraid to talk about telecommunications as part of “industrial policy.” (For me, that phrase connotes smokestacks and Margaret Bourke White photos, so I'd probably say “economic policy.”) For example, Zita continued, in S. Korea the government said where they wanted to go, invested in research and development, [and invested money and made micro loans], and they're now seeing 70% of adults (not just kids) involved in online social networks. Very high speeds, very low cost. Hong Kong is also not embarrassed to talk about economic policy and telecom. Zita noted that opening up spectrum, as Ofcom plans to do, is a traditional telecom regulatory move.
In response, Richards said that, yes, it's true that some countries in Asia have this policy approach to telecommunications, and a couple of countries are doing this in Europe. [Paraphrasing]: “It's an overarching political choice. It's not something we feel is a good idea in the UK.”
[Update — see snarky article here about Ofcom's failures. Thanks to Dirk van der Woude.]
Today, we're reading that the Indian government “proposes to offer all citizens of India free, high-speed broadband connectivity by 2009.”
Well, so far in the US we also haven't linked economic policy explicitly to universal highspeed internet access (although we should), so the best we can do is hope for more enlightened spectrum policy and assume that someone will show up to help. The Commission is making noises about possibly being interested in “open access” requirements for part of the 700 MHz auction. (Commr. Copps: “I .. am pleased that we ask general questions about how the 'open-access' proposals made by some might encourage the development of a sorely-needed wireless 'third pipe' in the broadband market.”)
According to Harold Feld, “this condition would prohibit the licensee from engaging in retail wireless service sales (on this spectrum), and require the licensee to lease wholesale spectrum on a non-discriminatory basis. If adopted, it would make 30 MHz of 'beachfront' spectrum available for lease in every market in the U.S. This proposal is in addition to the 'Frontline' proposal, which would create a public-private partnership with public safety to make up to 22 MHz of spectrum available under an 'open access' condition, but such commercial use would be 'preemptable' by public safety.”
So it's not economic policy, it's tinkering with spectrum policy, but it's better to be asking questions that might make wireless highspeed access a realistic alternative here in the US.
Ed Richards, Ofcom
Ed Richards, Chief Executive of Ofcom, was at Columbia today.
He reminds us that Ofcom was formed in December 2003 “as a response to convergence.” They have authority over broadcasting, telecoms, spectrum management; they also have antitrust authority within those sectors, although Ofcom is “entirely dependent” of the UK government.
Richards says that 95% of spectrum in the UK has been subject to command and control regulation. So his vision is to move by 2010 to a “predominantly market-led” scheme to cover 70% of spectrum, “available for use by any technology,” and subject only to avoiding harmful interference. I believe Richards said that Ofcom is encouraging the release of spectrum by law enforcement — something like a total of 350 MHz below 3GHz.
On net neutrality: Ofcom sees NN like the Janet Jackson wardrobe malfunction issue — when the issue is understood, “we in Europe wonder what the fuss is about.” But Richards does think that every country will have to consider this issue, although outcomes will vary. He thinks there may be some advantages to consumers in treating different applications differently. His major point is that he has there is a different view in the UK. “If you have network operators who are dominant or have market power, charging for prioritization may be anticompetitive, then the regulator should intervene. But if a network operator has no market power and is charging for prioritization, then it's a different question; their activities shouldn't be automatically construed as anticompetitive or necessarily regulated.”
Richards continues, saying that the NN debate does give us insight into importance of disclosure to consumers — consumers should be able to switch providers, and they should know which ISPs are making prioritization decisions. This should be an obligation of suppliers to communicate this information to consumers. In particular, he says that Ofcom is actively exploring whether network operators whose traffic shaping activities change materially should have to tell consumers — and if these changes are significant consumers should be allowed to break their contracts with the provider without penalty.
Dave Burstein asked a strong question: BT isn't giving 24 Mbps to anyone (really) — it's 1 Mbps up and 8 down. This means that London is behind Paris in terms of broadband. How do you change that? Give incentives to BT? but that might be a wasted subsidy. Or do you provide a stick instead — the regulator can point out that the existing copper is obsolete and lower the base rate that BT is allowed to charge.
Richards responded (paraphrase): Yes, your facts are right, but “there will be change”. Why — because people deserve it? because we're behind Paris? I hope that we are not as concerned about politicians are about Paris. I know that broadband is a big yardstick of national machismo, but you have to think about these things carefully. You shouldn't sell your soul in the short term. You could end up losing all the longer-term dynamic benefits of competition. True, we may be entering a time when the economies of scale/barriers to entry for new providers are even more profound, but you shouldn't leap ahead with a policy response out of a national sense of pride.
And here's where I heard it all come together.
Richards said (paraphrase mine): We won't give network providers money — instead, we want to let the market make the decision. Are consumers willing to pay for a higher-speed broadband network? It has to be be funded by consumers. I see no case for funding broadband by the government. A national response of government funding would likely waste taxpayers money, preempt the market, and re-create a state monopoly. So we have to encourage consumers to pay more — they need to like the service proposition that they get. This can include content rights, bundles of services, etc.