Disappeared News

by Larry Geller

SB1680 is supposed to be an important bill because it would put Hawaii in some kind of a leadership position through improvement of our broadband infrastructure. Translate: it might create jobs.

Is this a reasonable expectation, and is it a good reason for the vast upheaval and reconstruction of the state’s communications infrastructure that the bill would mandate? And is there a need for such a rush to restructure?

I continue to think not. The federal money must simply be used as the stimulus bill specifies. Nowhere does it require state governments to restructure. In other words, the Senate bill may represent an opportunistic power grab by creating an appointed commissioner with powers the media usually ascribes to a “czar.” It moves traditional bureaucratic functions created by statute into a policy position, a commissioner appointed by the governor.

We’ll get to the job creation aspect in a bit.

So what is the federal requirement, and what will Hawaii get from the federal government?

From a Los Angeles Times article, Crafting the broadband provision of the stimulus involved plenty of networking, February 17, 2009:

The Internet access segment of the stimulus bill was designed broadly, with the goal of providing grants to applicants submitting proposals for improving the availability of high-speed service.

The money can be used for extending wired lines or wireless access -- although specific data speeds are not stipulated -- and for equipment such as computers or training to help people use the Internet.

Most of the money would be distributed in grants, which could go to companies, nonprofit groups or municipalities. The federal government would pay up to 80% of the cost in most cases. All the grants must be made by the end of the 2010 fiscal year, and at least one grant must go to each state.

Subject to further research, it appears that Hawaii would still be on the hook for 20% of the cost of extending its infrastructure. This may or may not be a good investment, depending, it seems, on whether we want to further job growth in traditional urban areas or develop infrastructure in rural areas. From the article:

For example, the prospect of enormous job growth was a key element in the provision's near-universal appeal. But some of the most impressive numbers -- predicting the creation of 1 million jobs -- came from studies funded directly and indirectly by the trade unions and telecom companies that would benefit from the subsidy.

"A lot of the numbers that were used in this debate were exaggerated," said Robert Crandall, an economist at the Brookings Institution. "The problem with broadband subsidies in the stimulus bill is that they focus so much on rural areas. Those areas already get lots of subsidies for telecommunications, and there is no evidence that those subsidies work."

The reason that we may not want to spend our 20% match on improving broadband access in rural areas is simply that there will be little business use of very high-speed data. This is debatable, and we should hold that debate early in the process. We should also put a check and maybe a double-check on any estimates provided by DBEDT, because the state is too short of funds in these challenging economic times and DBEDT is too long on hype.

So to summarize so far, we need to have proposals for improving the availability of high-speed services. Those can come from government, business or non-profits.

What kind of proposals are needed? From the article again:

The projects must be substantially completed in two years. They might include, for instance, laying fiber-optic cable or erecting wireless communications towers and other infrastructure needed to make high-speed service available in areas that lack it.

The idea is that such service would encourage companies to locate in these areas, spur local entrepreneurs to start Internet-dependent businesses, and encourage economic growth by linking these regions to technologically more advanced and productive parts of the country. At least 75% of the targeted area must be rural and without sufficient access to broadband service to allow for economic development.

The Commerce Department will distribute $4.7 billion of the money, the Agriculture Department $2.5 billion.

Aside from the issue of whether Hawaii should spend money to improve broadband speeds in rural areas is the question of whether that data would be consumed. Going back to 1998 or thereabouts, DBED (there was no “T”) wanted the phone company to put a fiber optic line into the Mililani High Tech Park. The idea with the “High Tech” Park (which was really just a Castle & Cooke industrial park development) was that Hawaii would become a world leader, etc.

The fiber line was put in, but no one was connected to it. As it turns out, all the needs of the businesses could be provided by ordinary copper phone lines. In other words, the bandwidth was there, but no one needed it.

It wouldn’t make sense to put super-high data into the lava fields on the Big Island. It’s up to us to decide where the federal money (and the state match) need to be spent, that is, where it makes sense. The involvement of the Agriculture Department (and its $2.5 billion) is a reflection of the emphasis on broadband development in rural areas.

The stimulus bill itself is a humongous document. Fortunately, over at the New Yorker, Steve Coll is “Blogging the Stimulus Bill”, and we can rely on him to get us through this complicated section. This relates to the portion of the money administered by Ag:

A quick issue summary: The U.S. has shamefully low broadband penetration in comparison to other industrialized economies—we currently rank about sixteenth. An expansion of broadband investment and use is essential and should be a high priority for national policy. Generally, federal policy has relied, as it should, on private capital and decision-making, but the policy failures of incentive and federal support for backbone infrastructure are many—thus our pathetic global ranking. One problem is that private capital, it turns out, is mainly attracted to the dense populations in cities. In theory, as with rural electrification, the federal government could constructively support broadband expansion in less-profitable rural areas.

The money allocated in Title I can be used for “broadband infrastructure” anywhere in the United States, as long as seventy-five per cent of the area served is designated by the Secretary of Agriculture as a rural area deprived of sufficient broadband service. The authorizing language is so detailed here that it reeks of intensive lobbying. In fact, a flurry of lobbying shaped the broadband provisions of the stimulus bill, as described by the Los Angeles Times.

This led, among other things, to a splitting of broadband investment provisions in the stimulus bill, with the Department of Agriculture assigned to handle the rural policy. In addition to its mathematical definition of rural areas, Title I contains nine other provisos that narrow the acceptable use of this $2.5 billion to such an extent that it is hard to imagine how, exactly, anyone could come up with a permissible plan. Fortunately, that is not our problem—the last of these provisos requires the Secretary of Agriculture, who is Tom Vilsack, the former Democratic Governor of Iowa (and onetime ardent Hillary Clinton supporter) to report to the House Committee on Appropriations within ninety days on “planned spending and actual obligations describing the use of these funds.” Stay tuned— we’ll see what Vilsack recommends.

For the Department of Commerce section, there is a description on the Public Knowledge website. In the description that follows, note that the need to ensure “net neutrality” was mentioned in the public access provider testimony to the House Finance Committee last night, and in my testimony. It is lacking in SB1680 but required by the feds, so probably should be included:

The Broadband Technology Opportunities Program (BTOP) is a program to develop and expand broadband service. Its goal is to increase broadband access in un- and under-served areas. A large part of the program will encourage construction of broadband infrastructure. In a victory for an open Internet, the law requires grant recipients to comply with non-discrimination and interconnection obligations, to be determined by NTIA in consultation with the FCC. Under the law, the obligations will, at a minimum, adhere to the FCC broadband policy statement.

Additionally, the BTOP is tasked with providing broadband education, awareness, access, equipment, and support. This education and support is intended to assist institutions of higher learning, organizations that provide outreach and support to vulnerable populations, job creation facilities, public safety organizations, and generally stimulate the demand for broadband.

This last category is potentially the broadest. Funds can be allocated to any “projects and activities as the Assistant Secretary [of Commerce] finds to be consistent with the purposes for which the program is established.” These funds may go towards addressing the “demand side” of broadband growth. Essentially, there is a feeling that many people who can get broadband access do not consider it a worthwhile or useful service. Programs that help to promote the positive features of broadband access – a type of “internet evangelism” - will help increase broadband penetration by making the public more aware of the benefits of connectivity.

This section hints that Hawaii could benefit from convening a new task force, this time one that includes citizen consumers of broadband services and the public access providers as well. The public access providers are a well-developed resource for education as well as potential consumers of broadband data. The task force which resulted in this troubling bill (SB1680) did not include consumers, and so the public interest is not represented in the bill, as was noted in my and other testimony.

Let me comment on the “czar” plan right here—SB1680 contemplates a single commissioner, not a commission. If we want to utilize the federal money to the maximum effect, then the other regulatory functions piled onto the commissioner in this bill must suffer. Or, if the commissioner carries out the assigned functions, we will risk not being ready to take advantage of the grant money. Why not drop the czar thing and put a team together to work on the broadband requirements?

Returning to the Public Knowledge summary, it seems that one thing that states must do is map their existing broadband infrastructure:

The Commerce Department has two years to compile and make publicly available a map of existing broadband service capability and availability. No details as to the granularity of this map were included in the statute. As we have pointed out in the past, mapping is more complicated than it might appear. A number of questions about disclosure, accuracy, and public accessibility will need to be resolved in order for the map to be truly useful and worthwhile.

Again, in testimony last night, SB1680 was faulted because it creates exemptions from Hawaii’s Uniform Information Practices Act and curiously from the federal Freedom of Information Act to keep this data secret. The public interest isn’t served by withholding public information from the public! There were also a number of exemptions from state law (including procurement law) that would grant the czar unprecedented powers, with the results, according to law that would be created by this bill, that would be hidden from public view.

This has been a long article, but I hope it helps explain what this broadband drive is all about. If there is federal money to be had, and if it makes sense, we should get it.

Nowhere in my research did I find that states must create “czars” or change their communications regulatory infrastructure in any way. One must question why SB1680 was written to do that, and if putting the regulatory structure of Hawaii’s government into upheaval and confusion under an all-powerful czar in any way contributes to job creation (other than the czar) in Hawaii.

We can do it better another way. Almost any other way, in fact.

Permalink posted by Larry @ 4/04/2009 03:45:00 PM