AT&T, the iPhone, and New York City
BusinessWeek has a good roundup of this recent story here. We know that people shopping for an iPhone online using NYC zip codes were unable to buy one for a day or so. This is useful synecdoche - a big story in a small vignette, a part referring to a whole.
Explanations:
1. “New York wasn’t ready for the iPhone,” because AT&T “lacks a sufficient number of cell towers to meet the heavy data demands imposed upon the network by iPhone users.” (Customer service rep and BusinessWeek.)
2. Fraudulent activity - heavy ordering of phones to be sent to particular addresses, so AT&T halted sales to all relevant zipcodes until it could fix the situation. Phones could be sent to other countries after having been unlocked.
3. Credit card fraud, not necessarily associated with unlocking phones.
It’s well-known that AT&T’s cell capacity isn’t able adequately to handle use patterns in urban areas. Calls get dropped, data moves slowly, and subscribers are frustrated.
What’s the answer?
One move is “more spectrum,” and FCC/NTIA are on the hunt for commercial and federal spectrum that can be repurposed for wireless high-speed Internet access. (They’re also working to encourage sharing of both commercial and federal spectrum.) This won’t be easy - there are hold-ups and relocation costs at every turn. And it’s not clear that the two big players (AT&T and Verizon) should be allowed to buy up all the spectrum that is cleared, because their holdings are so large already that they’re able to stomp on competitors.
But another key move has to be “more towers,” “more fiber to more towers,” and “more investment in infrastructure generally.”
AT&T does its level best to keep its dividend up (always, year after year) and its available cash numbers high. But that has to mean that the company isn’t investing as much as it could in improving its high-speed Internet access networks, both wired and wireless.
AT&T itself has remarkable margins for its wireless service. According to the most recent SEC documents I could locate, its EBITDA margin (operating cash flow divided by total revenue, so the percentage of a company’s revenue that is remaining after operating expenses) for wireless services is about 40%.
It’s hard to tell how much AT&T is actually spending on towers and equipment - they lump all of their capital expenditures for all of their services together (not just high-speed Internet access), and say that they spent 11B over the first three quarters of this year. FreePress has done an analyis that notes that capital expenditures by the wireless industry as a percentage of revenue are down over the last few years. This disinvestment is happening at the same time that profits are going up, costs are going down, and there isn’t very much regulation.
So if we assume CAPEX is going down and ARPU is going up for AT&T, where does that leave high-speed Internet access for the rest of us?
In Japan, NTT doesn’t pay dividends and they’re wiring the country for 50-100mb. I’m confident that the FCC is looking at international comparisons.
Leadership
Today is a little sad, because I finished reading William Manchester’s “The Last Lion: Alone, 1932-1940” yesterday.
Thumbnail sketches of character and leadership are everywhere in this heroic book - Manchester’s treatment of Churchill’s character during his exile from public life is the centerpiece, but many others come in for swift explanation as well.
Baldwin: Relying on “a kind of sociological radar - signals from the voters - to determine his course,” politically expedient, passive, unsure of himself.
Chamberlain: Decisive, self-confident, domineering, grim, graceless, ruled by public opinion, wanting a quiet life for business, resentful of criticism, searching desperately for a way out, overreaching, vain, rude, vindictive, possessed with a gift for command, convinced that if he could just put the right deal together Hitler would buy it.
Churchill: Contemptuous of opinion polls, charming, Victorian, able to concentrate fiercely for long periods, driven, possessed of “a built-in gyroscope which would carry him toward his objective through tumult,” often plunged into gloom, proud of Empire and a firm believer in the strength of the British public, a prodigious writer, prose “vibrant with the terrific energy that can hold and sway vast audiences,” courageous, boundlessly fond of his family, anachronistic in dress and speech, delighting in combat, risk-loving, a grand visionary, a thespian on the radio.
Edward VIII: Pursuing pleasure, his abdication for Wallis Simpson “the greatest story since the resurrection” (Mencken), narrow, shallow, dandyish.
Generalissime Gamelin (commander in chief of the French Army): indecisive, given to issuing impulsive orders that he then countermanded, timid, unpredictable, rejecting radio contact with field commanders: “There he was, in a setting as quiet as a convent, attended by a few officers, working and meditating without mixing in day-to-day duties. In his retreat at Vincennes, General Gamelin gave the impression of a savant testing the chemical reactions of his strategy in a laboratory.” (de Gaulle). A “nice old man not remotely equal to his enormous job.”
Don’t send a low-ranking representative to lead Anglo-Polish-Russian talks - they’ll fail: “[A]n obscure and undistinguished British party was led by Admiral Sir Reginald A. R. Plunkett-Ernle-Erle-Drax, of whom Dirksen wrote that he was ‘practically on the retired list and was never on the Naval Staff.’”
There were deep doubts about Churchill for many years. “The mass distrusts controversy. Reluctant to reconsider its convictions, superstitions, and prejudices, it rarely withdraws support from those who are guiding its destinies. Thus inertia becomes an incumbent’s accomplice.” Only after multiple crises did it become apparent that Churchill had been right all along. He had solid principles and unshakable convictions. He did not tailor his views to fit the moment.
Over-the-top demand
There will be plenty of posts here about the importance of ubiquitous, interconnected, nondiscriminatory, high-speed Internet access infrastructure to America’s economic future - but let’s not forget about the demand side. The FCC’s recent update on its national broadband plan work included a section on opening up the set-top box market:
- Increasingly, the television is becoming an Internet-access device
- Delivering Internet video to the television could drive higher broadband adoption and utilization (as 99% of households have TVs, versus 79% with computers) as new apps and uses would emerge
- The convergence of television and the Internet is hindered by the lack of innovation in the set top box market
- An open market in devices will drive further innovation
- To date, CableCARD has not achieved its intended goals, in part due to poor implementation
- The FCC has the authority to help open the set top box market to greater competition and innovation
This is a big deal. Video drives demand - if people can buy nondiscriminatory cable high-speed Internet access as part of a package that allows them to use any video set-top box (or other gateway) they want, and the price is right, more people will want access. More people demanding more access will help drive more fiber to more places, and more competition in the set-top box market will help this happen.
Right now, the market for the devices that provide gateways for multichannel video program distributors isn’t very competitive. Most cable operators provide their own, and there are substantial switching costs. With standards-based video gateways, the market would explode. Big deal. Be brave.
Long-term planning: NYC
I went back today and looked at the Future Melbourne wiki - a long-term planning project undertaken by the city’s residents. There were more than 11K edits from people there, and most of them thought the wiki was a useful tool. Melbourne wants to be a “bold, inspirational, and sustainable city,” and they started their ten-year strategic planning online.
I also learned today that New York’s tech Meetup is up to more than eleven thousand members. Their purpose: “On the 1st Tuesday of each month at 7PM, 6 people get 5 minutes each to demo something cool to New York’s tech community (geeks, investors, entrepreneurs, hackers, etc).” That’s a big group - and it’s just a fraction of the zillions of people all around the five boroughts starting new companies, finding new ways of making a living, and disrupting all the incumbent businesses in the city.
And my third data point today: NYU’s ITP winter 2009 show. The students were looking a little dazed - they had probably finished working right before the doors opened, and then they had to explain what everything was to all of us. But they were basically game. One of my favorite projects was Current, by Zoe Fraade-Blanar - mapping the intensity of Google queries over time to mainstream news coverage of the subjects of those queries. Basic finding: often the WSJ and NYT aren’t covering what people seem to be interested in reading about.
So if I were thinking about NYC’s future, I’d look to what Melbourne is carrying off - collaborative long-term planning, using online tools where possible - and I’d enlist the help of the NYU ITP students and the NYC tech meetup to drag this city’s planning into the 21st century. I’d bolster the role of NYU as this city’s MIT, because we know that universities catalyze and sustain regional innovation clusters (and because ITP is at NYU!). “Metropolitan regions—and regional industry clusters—represent a potent source of innovation and therefore productivity at a moment of national economic crisis,” as Brookings says. I’d figure out what new tech industries needed help to get off the ground, and I’d make sure that they had the connectivity to get there.
In the meantime, consider Melbourne. Nice beaches. Visionary planning capabilities.
Middle mile
The agencies responsible for implementing the Recovery Act competitive broadband grant programs released their first few grants yesterday while the Susan Crawford blog was getting back in gear. (Press release here; spreadsheet from the Broadband Breakfast Club describing the projects here.) There are several middle-mile projects in the mix that will provide abundant interconnection points for last-mile providers.
The spreadsheet shows that some of these first projects are funded solely by the Department of Commerce (BTOP), some by the Department of Agriculture (BIP), and some by both agencies - remarkable cooperation. About two-thirds of the funding announced yesterday went towards middle-mile projects, which makes a lot of sense. Middle mile transport connects towns to the large backbones of the Internet, and all of these middle mile links will be subject to interconnection requirements - meaning that any last mile provider will be able to connect on nondiscriminatory terms. Meaningful bang for the federal buck.
Here’s the narrative about one of these projects - in Maine - put together by a number of public and private partners and awarded $25M:
The Three Ring Binder project proposes to create an open access fiber-optic network extending to the most rural and disadvantaged areas of the state of Maine – from the Saint John Valley in the north, to the rocky coastline of downeast Maine, to the mountainous regions of Western Maine – linking the unserved and underserved areas of the state together with a modern communications network. The project proposes a 1,100-mile network that will pass through more than 100 communities, making broadband more readily available to 110,000 households, 600 community anchor institutions, and a number of last mile service providers. The public-private partnership expects to provide 100 Mbps broadband capabilities for University of Maine campuses, community colleges, government facilities, public safety departments, the MaineREN research and education network, and rural healthcare clinics and hospitals. The project plans to benefit clinics and hospitals by allowing for more immediate contact with clinical healthcare specialists and by increasing the collaboration of local community-based healthcare providers with specialists in major metropolitan areas.
This project will provide middle mile fiber for service providers to bring cost-effective, high-speed Internet access services to areas without access. And it will connect many anchor institutions – 10 campuses and outreach centers of the University of Maine System, three community colleges, and 38 government facilities. It’s a good story and a good start.
Q&A
Where have you been?
In early November 2008 I was in Cairo with the ICANN board. It was my last meeting on the board, and I remember thinking that my life was about to change.
It did, but in a surprising way. I got a ping from someone on the Obama-Biden transition team, and when I returned the call at 3am (following some typically endless private ICANN board meeting before the public meeting) I was completely surprised and pleased to be asked to work on the FCC transition with Kevin Werbach. I was so far away, it was the middle of the night, and the election in the U.S. had been such an exciting event - my head was spinning. I had had no involvement in the campaign and zero expectation of such a call to DC.
So I left Cairo at the end of the ICANN meeting feeling out of breath. The transition had set up in an anonymous building in DC, and I soon started spending every day there and at the FCC. Somehow I finished my class at Michigan (sorry, students). I kept my head down and worked with as much focus and intensity as I could summon. I was genuinely grateful to get the chance to help nudge the FCC towards a better future.
Towards the end of the transition period I was offered and accepted a job as a Special Assistant to the President for Science, Technology, and Innovation Policy on the National Economic Council staff. So for the past year that’s where I was - in the Eisenhower Executive Office Building next to the West Wing.
Was it fun?
People always ask this question, so I’m going to address this vital issue head-on: Yes, it was fun, in the unbelievably-intense-let’s-get-a-lot-done sense. When a new administration arrives in town, the political appointees aren’t yet in place at the agencies. For those of you who have worked in startups, this was like that. There was a great deal to do, as quickly as possible, and resources were incredibly limited. Fun. Very entrepreneurial.
What impressed you?
I was impressed by the quality of the people I worked with on the White House staff - the vast majority of them were skilled, practical, collegial, and doing their best at all times. I was impressed by several of the Secretaries with whom I came in contact. There are good, smart people all over the administration, trying their best against almost impossible odds.
What did you learn?
Studying the operations of government gives you about as much knowledge about how government actually works as studying a map of a city gives you information about what it’s actually like to live there. Those on the “outside” can’t really understand until they’ve been “inside,” and I’m glad I got the chance. I got a lot done. It was a good year.
Why just a year?
I was always on the Michigan teaching schedule for January 2010 because I had promised the dean that I would be gone just one year. It was a tumultuous time - I had arrived in Ann Arbor in September 2008 for my new job, and (effectively) disappeared two months later. At one point I had a house in Ann Arbor, an apartment in New York City, and an apartment in DC - no chance I could afford all of those locations. Eventually I rationalized the situation a little, becoming a houseguest in DC (for many months, thanks!) and remotely closing up my Ann Arbor place and putting everything in storage - I couldn’t even get away to participate in the moving process. A year was right for me.
Will you be blogging again?
Here I am. Yes. I have missed having this daily opportunity to write. I feel as if I’ve been in touch with many people - one of the things you do in the White House is hold a lot of outreach meetings. But we have a lot of work to do together. So I’ll be blogging, tweeting (@scrawford), and keeping in constant contact. Send me your thoughts, either by comments here or via email to scrawford at scrawford dot net.