| geert on Wed, 4 Aug 2004 18:31:48 +0200 (CEST) |
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| <nettime> Andy Oram: Getting U.S. Universal Service to Work |
(Hi, I added U.S. in the title because Andy is referring to the USA, not
to the 'universe' or this planet in particular. Universal access mean
access within the border of one nation. /geert)
From: Andy Oram <[email protected]>
http://www.oreillynet.com/pub/wlg/5217
Getting Universal Service to Work
The notion of universal service in communications has great staying
power. Although the term "universal service" itself has fallen into
disfavor--I'll explore why in just a minute--the commitment to the
concept remains high, even in our troubled economic and political
times. Just try going to the [85]Thomas legislative information site
and do a search for bills containing the word "broadband." Most of
these bills are striving for some form of universal service, such as
high-speed Internet in rural areas.
But a parallel political universe in universal service has also
arisen. A number of researchers in recent years, mostly on the
political right, have critiqued the long-standing ideal of providing
everybody with communications.
* In the 1990s, Milton Mueller published a series of papers,
followed by the book Universal Service: Competition,
Interconnection and Monopoly in the Making of the American
Telephone System, that presented a bold claim--and an economic
analysis to back it up--that the universal service policies
undertaken by the phone company from the very start did nothing to
improve actual phone system coverage.
* A [86]policy analysis for the Cato Institute by Lawrence Gasman
argues that the problems in providing phone coverage have been
exaggerated, and that the policies intended to create universal
service have been counterproductive because they prop up outmoded
networks.
* Economist Hal Varian has also stated that geographic subsidies
should not be created toward the goal of universal service,
because the availability of communications should be treated like
the many other factors people use in choosing where to live and
work. No one gets a parking garage subsidy from the government for
choosing to live in a major city, so Varian asks why they should
get a communications subsidy for choosing to live in an isolated
rural area.
* Most damaging of all, perhaps, are [87]reports of fraud and abuse
in the one explicit universal service program mandated by law in
the United States, the E-rate program for schools and libraries.
(The law also provided funds for rural health clinics, but that
was spun off into a separate program.)
These critiques offer serious food for thought and a chance to
re-engineer programs toward what's most effective. That the spirit in
which they are offered is in no sense constructive does not reduce
their importance. It would be easy to argue that the attacks are part
of an ideological, corporation-friendly campaign to paint everything
governments try to do for their citizens as bureaucratic, wasteful,
and pointless. But approached with open eyes, the critiques can lead
us closer to universal service.
FCC Chair Michael Powell, consistent with his free-market views, has
cast aspersions on the universal service ideal, most famously with his
joking complaint about suffering from a "Mercedes divide." But in
other comments, he's suggested that there's value in policies aimed at
getting advanced communications to people who lag behind.
The key lesson from surveying the available history is this: universal
service programs that enforce a narrow strategy, and that distort
economic realities to favor that strategy, do indeed risk the kinds of
failures claimed by political opponents of universal service. Such
programs can reward the wrong things and set up an environment ripe
for abuse and waste.
On the other hand, flexible strategies that reward creative thinking
and keep everyone's focus on the prize can be surprisingly effective.
Let's look at the principles of universal service and at some recent
efforts to find out what should continue and what should be discarded.
In defense of the universal service principle
Transit systems are routinely subsidized in countries around the
world--and the United States is no exception. While the Federal,
state, and local governments pour most of their transit billions into
automobile traffic (with airlines getting handouts too since the
September 11 attacks), there is also substantial funding for buses and
train lines. Governments clearly see a social good in transportation.
And the reasons for the importance of transportation go quite deep.
Mobility is key to the modern employment market. People who can travel
easily can find work in new places and still keep in touch with their
families. Businesses benefit from transportation too: they can open
offices in other cities and keep in close touch with suppliers and
customers.
None of these actors could budget for the entire infrastructure of
modern transportation and factor it into their career or business
plans. Government support for a robust universal transportation system
enables economic diversity and social unity.
Note that universal transportation doesn't try to be rigidly
egalitarian. No one says that traveling from the remote Alps of
Northern Italy to Rome should be as easy as going from Milan to Rome.
Geographic and demographic differences help drive policy.
All the arguments for government-funded transit apply even more
strongly to communications, because it's so much easier to move
photons than people and because the uses to which communications can
be put are so much more varied than transportation.
Access to communications has impacts that no one can budget for in
advance. As recent examples, look at the life-style changes wrought by
the Web and by cell phones. Universal access (or more accurately,
near-universal access, where the percentage of population using the
system reaches a tipping point) has even greater social effects than
the sum of individual accesses.
Universal service is not a luxury, as Chairman Powell indicated with
his "Mercedes divide" wisecrack. In an age where people deal daily
with large, impersonal institutions (government agencies, insurance
companies, multinational retailers)--an age of global trade and
development, where money and goods travel around the world, and people
of all economic classes do as well--an age where people seek new
vendors and services more and more frequently, and where information
mutates so incessantly that no durable medium can keep up to
date--universal service is becoming a necessity.
Private enterprise and public entrepreneurism
A substantial body of research indicates that private enterprise is
inherently efficient. The people who wrote that research appear to
work at think tanks, however, not private enterprises.
Anyone who has worked in a private enterprise knows what really goes
on there. In any enterprise of more than a few dozen people,
bureaucratic barriers and pockets of unproductivity crop up and stay
around for long periods of time. A bumbling but politically astute
manager can hire incompetent staff and maintain a whole department of
dead weight, dragging down the efforts of others. Companies are
irrational entities: they refuse to acknowledge errors promptly and
pour good money after bad.
In short, all the failings attributed to government happen in private
enterprises too. These failings are a fixture of human nature and
organizational dynamics.
Grossly inefficient companies do get shoved out of the market
eventually by more efficient ones; in that way private enterprise has
an advantage over government in terms of efficiency. But such
processes take decades and just restart the cycle, because each new
company obeys the same laws of human nature and organizational
dynamics.
Technological innovation may be speeding up the cycle, but if
businesses were truly efficient, rises in labor productivity would
come much closer to the technological and social changes that drive
them.
Certain independent variables sometimes render government services
more expensive than private services. Most significantly, government
tends to pay good wages and benefits, a humane approach to the
workforce that private industry could learn from. Governments also
create numerous regulations, such as those regarding procurement, that
may get in the way of fast action, but that also has something to
teach private industry about honest financial dealings.
Innovation, dynamism, and creativity can be found in governments. Some
governments present excellent models of entrepreneurial activity in
the form of communications services structured as public utilities, a
trend I documented several years ago in my article [88]Echo of the TVA
Comes Over Municipal Data Networks.
The Example of Municipal Networks
The press has recently had a field day covering the trend (which has
been ripening for a long time) toward outsourcing services from
developed to underdeveloped countries. But few writers point out that
the whole phenomenon depends on the availability of high-speed
communications. What lessons can developed countries learn from this?
A tiny American municipality such as [89]Glasgow, KY cannot be blamed
for wanting the same economic opportunities as remote call centers in
India or the Philippines. Thus the movement for municipal networks.
Municipal networks show that government agencies can be efficient,
entrepreneurial, and innovative. The goal of such networks are to
provide every citizen in a town or city with the option to join a
high-speed network. The range of solutions is vast.
Some networks are pure fiber; most are a mixture of fiber and copper;
many of the new ones involve wireless too. The Wireless MAN or WiMAX
standards (based on IEEE 802.16) will probably make wireless even more
of a factor. Municipal wireless hotspots were [90]praised by a very
highly placed government official this past June.
A stray thought: people seem to be willing to pay for WiFi equipment
but not for WiFi service. Perhaps, then, a value-added tax could be
levied on wireless equipment in order to fund universal wireless
service.
Some networks offer Internet access on top of raw network
connectivity; most are limited to offering connectivity and open up
the network to bids from competing Internet service providers. This
promotes competition far more than the oligarpolic provisions of the
1996 Telecommunications Act; it creates an environment where
entrepreneurial small businesses have a chance.
Telephone companies fear municipal networks. On the surface their
anxiety appears misplaced, because the two types of systems are not in
competition. Most towns started municipal networks only after trying
and failing to get bids for private cable or high-speed fiber
networks. The private companies flatly refused, submitted ridiculously
unaffordable bids, or failed to provide acceptable service. Most
municipal networks, in short, began as acts of desperation.
But now municipal networks are proving their value and viability. So
the telcos pull strings and get state legislatures to pass laws
prohibiting the networks, or putting in place restrictions to make it
difficult for such networks to start up.
The Telecom Act says that "any entity" must be allowed to compete in
the communications marketplace. This would seem on the face of it to
protect municipal networks. But the Supreme Court recently upheld the
state laws by declaring that "any entity" refers only to private
companies.
Thus, the court accepts the telco's view of citizens as helpless
consumers who must simply wait for a telco to offer them services
under conditions chosen by the telco. And perhaps the court has judged
Congress's intent rightly. The Telecom Act is widely understood to be
a boondoggle for large communications companies; new competitors
barely have a chance. (It's worth noting, though, that not all courts
have swallowed the telco line.)
And as the telcos go, so do the anti-regulators. While the laws
prohibiting municipal networks are an explicitly burdensome form of
regulation, they have never been criticized by the supposedly
anti-regulatory crowd.
The Cato Institute has not taken a stand on municipal networks. But it
has complained that [91]cable companies are effectively underregulated
monopolies and that [92]municipalities regulate content and other
aspects of cable franchises beyond the minimal considerations of
public safety. These arguments are an indictment of the current,
obsolete cable system. With a broadband network of video-width
capability, there would be no need for picking and choosing cable
offerings.
The city and town employees I've talked to in my research of municipal
networks seem just as thoughtful, just as resourceful, and just as
rich in vision as innovators in the private arena. These employees put
their talents to the benefit of their citizens rather than to making a
profit, which does not mean they're superior to private firms but
simply that they can carry out projects that private firms don't want
to risk or can't justify economically.
Municipal networks are not a total solution to universal service.
There are still rural residents too far from a Point of Presence to
benefit from those solutions; other cutting-edge options such as
satellite Internet may bridge the gap for them. The digital divide is
also exacerbated by the widespread need for more education and
hardware. Finally, in many areas, private solutions serve most
people's needs, so government may do best by keeping its hands off.
Thus, it is not only the actual histories of municipal networks, but
the general lessons we can draw from the impetus behind them, that
illuminate the path forward.
The Problems of the School/Library Fund
The E-Rate has provided the latest cautionary tale in the history of
government subsidies for communications development. But as I pointed
out in an article titled [93]An Expanding Universe for a Universal
Service Program, the universal service fund is far bigger than its
failures. Tens of thousands of institutions have received Internet
access thanks to the fund.
Critics of government efforts call for the abolition of the fund,
citing mismanagement as their reason. Using the same logic, one could
call for the abolition of stock markets worldwide, on the basis of the
destructive criminality of Enron, WorldCom, Parmalot, and other
companies that dwarfs the abuses of the universal service fund.
Nonetheless, we can learn a lot by seeing what went wrong with the
E-Rate. I analyze the failings as follows.
* The FCC built assumptions based on existing, widespread models
into its regulations, and thus required that new installations be
"more of the same"; this benefited incumbent companies.
* In particular, regulations prevented the use of funds for the
purchase of external lines or wireless equipment, which would have
been a low-cost, long-term solution for many schools and
libraries.
* Schools and libraries were not given practical goals, but simply
instructed to spend as much of other people's money as they could.
In other words, their goal was to spend the available money on
easily obtainable equipment, not necessarily to make the best
possible use of the money. They had no encouragement to be
creative.
* The law provided only telecom equipment and networking services.
It did not consider other useful things one could ask for to
achieve Internet access. Such as computers, for instance. Or
trained teachers and staff.
The second point deserves a bit more attention, because its causes and
effects are complicated.
The FCC, of course, did not explicitly say, "We will pervert the
E-Rate to funnel money into incumbent phone companies and to deny the
schools and libraries control over their own networks." Instead, the
FCC imposed a complex and arbitrary set of technical regulations that
led to these results.
According to Dave Hughes, owner of [94]Old Colorado City
Communications and a long-term master of community networking using
wireless Internet, FCC regulations permitted money to be spent on
leasing lines and services, and on equipment used on an institution's
own right of way. Funds could not be used to purchase equipment whose
range crossed a right of way, such as a public street or a piece of
somebody else's property.
First of all, these regulations made wireless networks impossible.
They're too free and messy for those sorts of regulations, as my
next-door neighbor found out when I let her know I was jacking in on
her wireless LAN. A wireless network can extend for miles, which is
one of its great benefits.
Second, the regulations discouraged schools from investing in their
own copper or fiber, a "customer empowered network" of the sort
developed by [95]Internet2 or [96]CANARIE, which is fairly cheap to
acquire because of left-over fiber from the dot-com boom, and which
would provide a lasting infrastructure. Instead, the schools funneled
their money into services leased from local telephone companies, the
only expenditures covered by the FCC's interpretation of the E-Rate.
If Congress decides to take away the subsidy, schools will be left
with the choice of throwing more funds at the leased lines every year
or losing their Internet access.
In fact, schools want their local area networks to extend outside
their walls. They want to talk to other schools in their districts,
and Hughes has pushed them to provide access to students and parents
at their homes in neighborhoods around the schools. Wireless extends
the power of the E-Rate--but the FCC treated that as a drawback rather
than an asset.
In 1996, wireless Internet was still a rather experimental, fringe
technology. Now it represents an obvious and gaping failure in the FCC
implementation of the school and library fund. The option of buying
fiber directly has also become more affordable since the Telecom Act
was passed, largely because the WorldComs of the world strung too much
fiber during the dot-com boom and it's no going for fire-sale prices.
It's not too late to revise the provisions surrounding the E-Rate.
General lessons
The key lesson of the school and library fund is that government
action should be structured around results. The E-Rate was oriented
instead toward equipment. Once the school or library got its money, it
simply spent through this money until it got as much equipment as
possible. The process did not deal with the question of whether the
purchase represented the most effective solution to the problem--in
fact, it didn't try to define the problem.
As mentioned, other provisions of the law or its implementation
reinforced uncreative spending. The excruciatingly spelled-out bidding
process mirrored the way schools and libraries had previously achieved
Internet connectivity and therefore led them to order more from their
current provider (usually a local incumbent Bell company). And the
"right of way" regulation ruled out the options that would have been
most cost-effective and powerful for many districts.
Let's contrast this with the success stories I mentioned for municipal
networks. Success was achieved because:
* Municipal employees started with a clear definition of the
problem.
* The problem was very broadly defined, with reasonable parameters
but no artificial constraints (other than those imposed by
enemies).
* The employees were responsible for the budget, and therefore had
strong incentives to use their creativity to keep costs down.
A lot of factors go into determining whether it's worth spending a lot
of government money on a project that runs counter to market values. A
well-established technology that is likely to remain useful for a long
time--such as electrical wiring--is a better candidate for universal
service than a technology this is still subject to disruptive new
influences.
And once the vast majority of a population has something, it might
make sense to subsidize the remaining few percent that need it. In
contrast, we should question mass undertakings that try to spread
something that has only recently caught on.
Perhaps these considerations can illuminate the discussion around a
popular bipartisan bill for bringing broadband to rural and
"underserved" areas, designed by the same senators Olympia Snowe and
John Rockefeller who proposed the E-Rate in the 1996 Telecom Act.
There is no question that the bill will, to some extent, throw money
at large telecommunications providers. Insofar as it encourages the
extension of old models to new areas, it would just prop up obsolete
networks.
However, the definition of telecommunications in the bill is quite
broad and includes wireless options. If it leads to new networks,
and--even better--the entry of new companies, it may be a progressive
force.
We need much more research into what has worked in communications, and
more education for others interested in that solution. For instance, a
non-profit organization called the Center for Civic Networking has
organized seminars on municipal networks and written guides for IT
staff and city officials interested in trying them. What we need is a
community and culture of people devoted to universal service. We
should not be afraid to cross ideological lines and combine elements
of different models in the pursuit of access for all.
_________________________________________________________________
[105]Creative Commons License This work is licensed under a
[106]Creative Commons License.
References
85. http://thomas.loc.gov/
86. http://www.cato.org/pubs/pas/pa-310es.html
87. http://www.public-i.org/dtaweb/report.asp?ReportID=492&L1=10&L2=10&L3=0&L4=0&L5=0
88. http://www.praxagora.com/andyo/ar/municipal_net.html
89. http://www.glasgow-ky.com/papers/
90. http://www.whitehouse.gov/news/releases/2004/06/20040624-7.html
91. http://www.cato.org/pubs/pas/pa034.html
92. http://www.cato.org/pubs/pas/pa040.html
93. http://www.praxagora.com/andyo/wr/erate_results.html
94. http://oldcolo.com/
95. http://www.internet2.edu/
96. http://www.canarie.ca/about/index.html
105. http://creativecommons.org/licenses/by-nc-sa/1.0
106. http://creativecommons.org/licenses/by-nc-sa/1.0
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Andy Oram O'Reilly Media email: [email protected]
Editor 90 Sherman Street voice: 617-499-7479
Cambridge, MA 02140-3233 fax: 617-661-1116
USA http://www.praxagora.com/andyo/
Stories at Web site:
The Bug in the Seven Modules Code the Obscure The Disconnected
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