On June 26, 2018, Blair Levin, Executive Director of Gig.U, and Nonresident Senior Fellow of the Brookings Institute’s Metropolitan Policy Project, provided keynote remarks at the Kansas City Gigabit Summit. As he did in Austin, Mr. Levin again took the FCC’s BDAC process to task, and suggested better ways for cities and carriers to advance 5G networks — such as through smart local negotiations, among other options. We provide an excerpt of his prepared remarks below, with the full text linked at the end.
Cities, the FCC and Gigabit Networks
Blair Levin, Brookings Institute, Metropolitan Policy Project
It is pleasure to be with you today.
I open many speeches that way but here I really mean it.
This summit symbolizes the enormous vision, and a great achievement, of cities.
When I first spoke here, at the first gigabit summit in 2013, it was shortly after over 1000 communities had expressed an interest in having gigabit broadband networks.
By contrast, only one carrier was interested in offering gigabit internet service—Google. All the other carriers dismissed gigabit networks as a PR stunt; something done for bragging rights but irrelevant to creating consumer value.
Now, five years later, hundreds of cities have gigabit offerings and all the carriers are upgrading their fixed and mobile networks to offer such speeds as fast as they can. Charter has even declared this season “Gigabit Summer.”
Further, the federal government is saying that getting gigabit speeds on our mobile networks is a national imperative and failure to do so threatens our economy and national security.
This is a big and welcome change. The federal government is recognizing what cities and those of us here in 2013 already knew: that our policies should ensure that bandwidth never constrains economic growth or social progress.
Unfortunately, one thing hasn’t changed; the federal government’s view of its own role in helping achieve that goal. It is:
1. Make cities do all the hard work, pay all the government costs and accept all the blame for whatever happens; and
2. Let the federal government pay none of the costs, do none of the hard work, and take all the credit.
The first speech by an FCC Chair about Gigabit networks was in 2013. He was concerned that Google Fiber and a project I was doing, Gig.U, were proceeding without his involvement so gave a speech to get the FCC in the game of gigs.
His policy prescription?
He challenged the audience to build a gigabit network in every state.
He provided no analysis of why they don’t exist, no insight into barriers that can be removed, and no policy to improve their prospects. He simply offered the moral equivalent of the ‘hearts and prayers’ kind of leadership that does nothing but make the speaker feel better.
I called that speech the “most amateurish speech ever given by an FCC Chair” that “bordered on the absurd.”
I can be very bi-partisan in my criticism.
But at least that speech did not set us backward.
Unfortunately, the current FCC is on a path, to do exactly that.
“…the FCC has curiously interpreted its statutory mandate to dramatically reduce its regulatory powers over broadcasters, ISPs, telephone companies, cable companies, and wireless companies, while simultaneously asserting new authority to regulate and micromanage…local governments.“
As I detailed in a speech a few weeks ago in Austin—one I will summarize rather than repeat–the current Federal Communications Commission (FCC) has curiously interpreted its statutory mandate to dramatically reduce its regulatory powers over broadcasters, ISPs, telephone companies, cable companies, and wireless companies, while simultaneously asserting new authority to regulate prices and micromanage over one set of enterprises: local governments.
A major tactic in the FCC’s effort to regulate cities is through its Broadband Deployment Advisory Committee (BDAC) process. The stated, and worthy, goals of the BDAC are to accelerate and broaden deployment of next-generation broadband networks and reduce the digital divide.
However, the BDAC suffers from significant failures of design and execution. The failures are threefold.
First, the BDAC did not have a balanced membership that could have lead to a real consensus between stakeholders.
The BDAC should have been designed to generate ideas that optimize outcomes for all stakeholders and build a political consensus that makes it more likely that those ideas will be adopted and implemented successfully.
Unfortunately, the FCC overwhelmingly filled the BDAC with industry representatives and therefore undercut its potential to build political capital for a balanced and optimal set of solutions.
Rather, the FCC has spent its political capital reinforcing a false narrative about how cities are the cause of delays in 5G deployments while ignoring the real, market-driven causes of delay.
Second, the BDAC started from the false assumption that industry does not have the leverage to negotiate the deals it needs to make investments in new networks.
The carriers themselves recognize they have the necessary leverage.
Google Fiber changed the traditional negotiating leverage by saying that it would build, but only in places where city government adjusted their policies to make it economically feasible.
And that framework applied to all carriers.
Consider what AT&T said about the impact of the Google Fiber process. Noting that municipalities had made it “’easy’ for Google Fiber, AT&T, in a pleading to the Broadband Opportunity Council, wrote that Google has “also essentially established a template for lowering existing regulatory barriers in other jurisdictions. That template, in turn, has allowed other providers to accelerate and broaden their plans for deploying the infrastructure necessary to provide high-speed Internet service. That has certainly been true for AT&T.”
Consider what Verizon’s CEO Lowell McAdam recently noted, “Cities are embracing us to come in and provide this broadband service for the citizens… .” He further said Verizon would walk away from cities that want too many concessions, adding, “there’s no market that’s not on the table.”
The pièce de résistance demonstrating the ability of carriers to work things out with cities without federal interference involves the carriers and San Jose. They were antagonists in the BDAC process, with the carriers supportive and the Mayor of San Jose, one of two big city representatives, resigning and blasting the process. He observed, “At the 11th hour, we saw industry rewrites that pushed aside everything that had been negotiated for an industry-friendly, cookie-cutter set of rules.”
But those parties were able to negotiate terms that all thought fair and allow the companies to begin 5G deployments. Notably, the deals include having the companies contributing to a digital inclusion initiative and helping the city pay for accelerated permitting.
Let’s engage in a thought experiment: What if the FCC in 2011 had said that fiber deployment was critical to the future security of the United States and therefore mandated that every city should give Google Fiber the same deal that Kansas City gave Google?
I am certain that there would have been a huge uproar with all saying that such a mandate is crazy, unnecessary, and a clear usurpation of local power to benefit a large private enterprise.
That is, however, what the BDAC/FCC process appears to be moving to—a single federal mandate for how cities should price their rights of way and manage local construction for the benefit of a select group of companies.
Third, BDAC did not understand the value of asymmetric value creation.
I am often a big fan of asymmetry. In 10 years of practicing corporate law, as well as in being involved with dozens of deals between cities and next-generation network providers during the heart of the Gig.U effort, I saw how every successful deal involves asymmetric value creation.
That is, the two sides don’t want the same thing. So, the trick is to find the things that cost side A little and create considerable value for side B, with side B doing the same for side A. Both, in this way, get more than they give. That value creation may be asymmetrical but the idea of both getting more than they give is hugely powerful.
The BDAC, however, ignored this kind of value creation. Instead, it focused exclusively on what cities could do to improve the profitability of the carriers. It did not ask—obviously it was not interested—in what it would cost the cities. It involved the kind of cost-benefit analysis in which the costs to one side are ignored and only the benefits to the other side are considered.
“…I expect the BDAC and the FCC will adopt a framework in which the industry gets all the benefits with no obligations and municipalities will be forced to bear all the costs and receive no guaranteed benefits.“
Due to these three failures, I expect the BDAC and the FCC will adopt a framework in which industry gets all the benefits with no obligations, and municipalities will be forced to bear all the costs and receive no guaranteed benefits. This kind of process will result in a large transfer of wealth from public to private enterprises—and leave American cities and metropolitan areas no better positioned to tap into digital telecommunications to unlock innovation and shared economic prosperity.
So how should cities respond to a BDAC that ignored their voices, market realities and any principles of fairness and shared rights and obligations?
I think it would be wise for cities to establish their own working group to establish best practices, work collaboratively to find solutions to new problems, and generally lower the cost of deployment…..
Read his full text here.
And also at the Benton Foundation website here.