April 13 is the deadline for the cable industry and others to tell the National Telecommunications & Information Administration how it should structure the broadband grant program. So Multichannel News's John Eggerton checked in with Larry Irving, the former head of NTIA under the last Democratic resident. Irving also advised the Obama campaign and transition team on communications policy and is co-chairman of the Internet Innovation Alliance, a coalition focused on universal broadband deployment.
MCN: You were on the team advising the administration about what NTIA should be doing. What did you tell them?
Larry Irving: The critical issue this year is broadband and everybody knew that.
The question was, did it have the capacity? What could it do, what could it do better? Lots of folks thought that NTIA should be at the fulcrum of whatever the administration decides to do with broadband. It is the only agency that has telecommunications technology responsibility and reports directly to the president. The [Federal Communications Commission] is an independent agency. For example, it does not do high tech and telecom. There really isn't another agency. RUS [the Agricultural Department's Rural Utilities Service] has a function in rural America, but in terms of rural and urban America, NTIA has the capacity to do a lot of work, with the FCC, on the state of broadband. And because it has run grant programs successfully in the past, because it has laboratories where it can do sophisticated technology analysis, and has the spectrum functions so it can take a look at what is happening in the wireless world., this is an opportunity to leverage all of those resources in a way that would bring broadband to America faster.
There are people in America who are unserved and there are people in America who could be served better. And I think that what the stimulus package reflects is all of those issues.
MCN: How should NTIA define open access and interconnection so that it does not discourage cable and phone companies from investing?
LI: While my association does not have a view on that, I think that the reality is that it is going to come down to logistics.
There is a desire to get the grants out quickly and cleanly and to have a robust set of people large and small including nonprofits, communities and all kinds of folks.
I tend to think that NTIA won't go through a prolonged process. There are four principles over at the FCC currently that you can buy into and that most people say are close to being adequate to preserve the open system.
I have no inside information, but I don't know how you would do a full rulemaking and redefine open access and still get grants out the door near term.
MCN: What specific advice would you give to NTIA as they prepare to give out all this money?
Lyndon Johnson said about appointments in government that for every one you make 99 enemies and one ingrate. NTIA is going to be facing a similar scenario in terms of the grants. One of the things NTIA has to be very cognizant of is that for every grant they give, it's "thanks very much for the money, now go away."
If you really care about a national broadband strategy, there is going to need to be continued review, oversight and responsibility at NTIA, which has to file quarterly reports on every grant that goes out there.
It is important that grant recipients not looking to NTIA as a funding source, but as a partner. We can't do all the things with federal dollars that need to be done in this country.
What we learn from the grants will be really helpful in terms of a going-forward strategy for NTIA, the FCC and RUS
MCN: Are there too many cooks with all these agencies involved?
LI: No. You have really smart people who play well in the sandbox together. NTIA has a broad role, RUS has a more specific role with regard to rural America, and the FCC has a policy role.
The FCC,a year from now, has to come up with a broadband strategy for the country. If they are not looking at what RUS and NTIA are doing and talking to them about what is really happening in the hinterlands, you are not going to be getting informed decisions by the bureaucracy. The best information is what is happening in the marketplace. How are people really responding? What happens when you put federal dollars in? What kinds of coalitions can you put together? Do community access centers really make a difference? When somebody goes to a library and has an experience with broadband that is positive, does that give them encouragement to go home and make an investment in a home broadband system?
Who are the people using these systems in those centers. If you are going to spend $7 billion, and that is only a down payment, you've got to get it right. In addition to that $7 billion that the government is spending, you are going to see something between $50 and $80 billion spent by the private sector. What encouragement, winks, nods, body language can the government give to the private sector to make sure that money is spent wisely in terms of public policy?
MCN: Are you saying the government can't dictate how this should happen?
LI: Certainly public policy will affect how much is invested and where it is invested. People make investments based on a lot of factors and certainly public policy is one of them. But competition is another one. The reality is the reason you are seeing vast investments on the part of the telcos and the cable guys is that they are staring each other down. The reason you are seeing Clearwire make huge investments is they want to compete against AT&T, Verizon and T-Mobile.
You want to use competitive spurs where appropriate and you want regulatory spurs where appropriate, but only where appropriate. And you don't want to over-regulate but you don't want to under-regulate if you have a prospect of market abuses. So it is a calibration.
The good news is that now that they have intended to nominate Larry Strickling [as assistant secretary at Commerce] and we know that Julius [Genachowski] is going to be at the FCC. They are smart guys with broad experience. Both have significant private sector experience. They know how businesses think and what they do. They have also spent a considerable time in government. And they also have worked together as friends and colleagues. You probably couldn't have a better scenario. With Gov. [Gary] Locke [as Commerce Secretary], you've got a guy who is up in Microsoft, Amazon, Real Networks terrain [as former Washington governor]. So he gets broadband. He gets technology. He is from a state that has been a significant player in our national technology debate. Then you have Strickling, who ran the policy shop for the Obama campaign for two years and has been a bureau chief so he knows how the FCC thinks. He has worked for private enterprise and has a good sense of what needs to be done there. And then you have Julius who has been general counsel of the FCC, worked on the Hill, been a venture capitalist and was also a senior executive charged with building a business for one of the most exacting CEO's in the country in Barry Diller. You start looking at those kinds of things, if you are trying to spend $7 billion wisely.
It is a team that is thoughtful and is going to do things. That doesn't mean they aren't going to make mistakes. If you don't make mistakes you're not stretching. And when you are talking about building a broadband network you want to have some stretch goals. You have to remember that it is your mother's and my mother's money, so you don't want to stretch them too far.
One of the things that nobody talks about much with regards to these grants is something that I think is really important and has to be top of mind to somebody giving out a lot of money. And that is something I gave a lot of thought to when I was running a much smaller grant program. And that is sustainability. When you put a dollar into a grant program and you give a community or an entity federal dollars to create an infrastructure, what happens when those federal dollars go away? This is a one time only infusion of money in most instances. Can that entity, community sustain that infrastructure. And if that is not the first question it better be the second question. You don't want to invest in things and shut them down in three or four years. That is just not a good use of taxpayer dollars. That doesn't mean there shouldn't be investment in local projects. But it does mean the sustainability question has to be asked.
MCN: Doesn't that argue for incumbents who have been there and are doing that?
LI: Not necessarily. Particularly when you talk about unserved. There are people who aren't there because they don't think there is a business model. So how do you build a business model that makes sense? On the IIA Web site there is a fact of the week. This week it is that roughly one-third of households in rural America cannot subscribe to broadband Internet services at any price.
That is because the business models don't work. It's not that people dislike rural Americans. They just can't find a business model that works. You want to create investments that are going to create business models that work.
So you want to make the investment, but not ones that are going to get people connected and then not be able to sustain it. It doesn't necessarily argue for or against incumbents. I have been on the board of some telecommunications companies that don't have the same business they had five years ago. An incumbent doesn't necessarily always have the key. It does argue that you need people to look at a business plan to make sure it works.
MCN: If you are trying to help the underserved, should the emphasis be on education and access to education or overbuilding?
LI: Underserved is a hard one to define, but to some degree I would think this is triage and how you get the most bang for the buck. First, you have to make sure the people who are not get connected at all [do] get connected. That should be a pretty high priority. The second priority should be the people who have broadband passing by their homes, but for one reason or another, and no one is exactly sure what the reason is, they opt not to take it.
We can do some things in regard to adoption. There are a lot of people out there who will say that is a cost problem. I would actually argue that it is a value problem, that people don't value broadband the way that they value other things because you will see that low income people, typically African Americans and Hispanic Americans, but even working class whites, will often take cable and cell phones higher than the rate of Anglo-Americans and middle class Anglo-Americans. So, black and brown, at almost every level, spend more on cable, satellite and cellular, yet they are not taking broadband. Are there some reasons that we can identify.
It also has to do with how broadband is marketed. I challenged some technology executives to watch the way that broadband and PCs are marketed on the mainstream media, and then see how wireless is marketed in the mainstream media. You almost never see black people or Latinos on PC ads or broadband ads, but you will see them all over wireless ads. Someone in the wireless community has figured out that blacks and browns want wireless and will spend more for wireless. Look at an iPhone ad from Apple vs. looking at a PC ad. The PC ad has the two whitest guys in America, while the iPhone ads have hip-hop music and they are very colorful. Somewhere there is the sense that we are not going to market this product to this group or that product to that group. I don't know that there is the same effort to get inside the head of black and brown consumers. It is one data point, but it is an interesting one.
If you are going to take cell, if you are going to take cable, if you are going to take satellite, clearly technology is not something you are afraid of. So, why are those same communities, same consumers, not spending money on broadband as rapidly? There is money in the grant program for innovative strategies to increase adoption.
MCN: We assume that approach to underserved would be more cost-effective than overbuilding?
LI: I have two broadband wireless subscriptions and two in-the-home subscriptions and by the end of the year I should have another one when [Verizon's] FiOS [Internet] comes to Washington. I have more broadband subscriptions than I have hairs on my head. But down the street from me in Washington, D.C., in the black community, broadband penetration is under 50%. I don't know what the reason is for that. But I do think that spending a little time figuring that out and changing those numbers might be a better use of money than some of the other options that people might look at.
MCN: Who should take the lead in the broadband rollout?
LI: The FCC has to come up with a national broadband strategy. I hope and expect that NTIA will help inform it, and RUS will inform it. But there are others, the Department of Energy, the Department of Interior. And there needs to be somewhere in the White House where everybody has to stand up and salute when information is requested if we are going to have a true broadband policy. Then there has to be a way for those in the industry who are making the investment and local and state governments to be involved heavily in that process.
There are a lot of different pieces that have to be plugged in. And you will need strong leadership from the White House.